<PAGE>
STAG LAST SURVIVOR
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICIES
HARTFORD LIFE INSURANCE COMPANY
P.O. BOX 2999
HARTFORD, CONNECTICUT 06104-2999
[LOGO] TELEPHONE: 1-800-231-5453
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Prospectus describes last survivor flexible premium variable life insurance
policies (the "Policies," and each individually a "Policy") offered by Hartford
Life Insurance Company ("Hartford") to applicants generally between ages 20 and
80 respecting both Insureds. For a given amount of Death Benefit chosen, the
Policy Owner has considerable flexibility in selecting the timing and amount of
premium payments.
The Policies provide for a Death Benefit payable at the death of the last
surviving Insured. The Policy Owner may select one of three Death Benefit
Options: a level amount equal to the Face Amount ("Option A"), a variable amount
equal to the Face Amount plus the Account Value ("Option B"), or a variable
amount equal to the Face Amount plus a return of premiums ("Option C"). The
required minimum initial (Basic) Face Amount is generally $100,000.
Under all three options, the Policies have Account Values which increase with
the payment of each premium and which decrease to reflect fees and charges made
by Hartford. These fees and charges vary depending on such factors as the Face
Amount, the ages of the Insureds and the level of the premiums paid. The Account
Value of a Policy will also vary up or down to reflect the investment experience
of the Funds to which the Net Premium(s) has been allocated, and the Policy
Owner bears the investment risk for all amounts so allocated.
If a Policy is surrendered during the first two Policy Years, the Policy Owner
may be entitled to a refund of sales loads in addition to the Cash Surrender
Value.
There is no guaranteed minimum Account Value for a Policy. If the Death Benefit
guarantee is in effect (see "Detailed Description of Policy Benefits and
Provisions -- Death Benefit," page 13), the Policy will not lapse due to poor
investment performance.
The initial Net Premium will be allocated to Hartford Money Market Sub-Account
and after the Right to Examine Period has expired, to one or more of the
Sub-Accounts or to the Fixed Account as specified in the Policy Owner's
application. The Funds underlying the Sub-Accounts presently are: Hartford
Advisers Fund, Inc., Hartford Bond Fund, Inc., Hartford Capital Appreciation
Fund, Inc., Hartford Dividend and Growth Fund, Inc., Hartford Index Fund, Inc.,
Hartford International Opportunities Fund, Inc., Hartford Mortgage Securities
Fund, Inc., Hartford Stock Fund, Inc., and HVA Money Market Fund, Inc. (the
"Hartford Funds") of Hartford Mutual Funds, each of which is managed by HL
Investment Advisors, Inc.; Putnam VT Diversified Income Fund, Putnam VT Global
Asset Allocation Fund, Putnam VT Global Growth Fund, Putnam VT Growth and Income
Fund, Putnam VT High Yield Fund, Putnam VT Money Market Fund, Putnam VT New
Opportunities Fund, Putnam VT U.S. Government and High Quality Bond Fund, Putnam
VT Utilities Growth and Income Fund, and Putnam VT Voyager Fund (the "Putnam
Funds") of Putnam Variable Trust, each of which is managed by Putnam Investment
Management, Inc. ("Putnam Management"); and the VIP Equity-Income Portfolio and
the VIP Overseas Portfolio of the Variable Insurance Products Fund and the VIP
II Asset Manager Portfolio of the Variable Insurance Products Fund II, each of
which is managed by Fidelity Management & Research Company (the "Fidelity VIP
Funds," and collectively with the Hartford Funds and the Putnam Funds, the
"Funds").
These Policies are subject to a front-end sales load which is set forth in the
section entitled "Detailed Description of Policy Benefits and Provisions --
Deductions from the Premium -- Front-End Sales Load," page 16.
- --------------------------------------------------------------------------------
IT MAY NOT BE ADVANTAGEOUS TO PURCHASE FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
AS A REPLACEMENT FOR YOUR CURRENT LIFE INSURANCE OR IF YOU ALREADY OWN A
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.
- --------------------------------------------------------------------------------
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED BY THE CURRENT PROSPECTUSES OF THE
APPLICABLE ELIGIBLE FUNDS WHICH CONTAIN A FULL DESCRIPTION OF THOSE FUNDS. ALL
PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
<PAGE>
2 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SPECIAL TERMS......................................................... 4
SUMMARY............................................................... 6
DETAILED DESCRIPTION OF POLICY BENEFITS AND PROVISIONS................ 9
General............................................................. 9
Premiums............................................................ 10
Premium Payment Flexibility....................................... 10
Allocation of Premium Payments.................................... 10
Accumulation Units................................................ 10
Accumulation Unit Values.......................................... 10
Premium Limitation................................................ 10
Account Values.................................................... 11
Amount Payable on Surrender of the Policy......................... 11
Load Refund....................................................... 11
Partial Withdrawals............................................... 11
Transfers of Account Value.......................................... 11
Amount and Frequency of Transfers................................. 11
Transfers to or from Sub-Accounts................................. 11
Transfers from the Fixed Account.................................. 12
Dollar Cost Averaging Option...................................... 12
Policy Loans........................................................ 12
Loan Interest..................................................... 12
Credited Interest................................................. 12
Preferred Loan.................................................... 12
Termination Due to Excessive Indebtedness......................... 12
Loan Repayments................................................... 13
Effect of Loans on Account Value.................................. 13
Death Benefit....................................................... 13
Death Benefit Options............................................. 13
Option Change..................................................... 13
Death Benefit Guarantee........................................... 13
Minimum Death Benefit............................................. 13
Supplemental Face Amount.......................................... 14
Unscheduled Increases and Decreases in Face Amount................ 14
Benefits at Maturity................................................ 14
Lapse and Reinstatement............................................. 14
Policy Lapse and Grace Period..................................... 14
Death Benefit Guarantee Default and Grace Period.................. 14
Reinstatement..................................................... 15
The Right to Examine or Exchange the Policy......................... 15
Surrender........................................................... 15
Valuation of Payments and Transfers................................. 15
Application for a Policy............................................ 15
Reduced Charges for Eligible Groups................................. 16
Deductions from the Premium......................................... 16
Premium Processing Charge ........................................ 16
Premium Tax Charge and Federal Tax Charge......................... 16
Front-End Sales Load.............................................. 16
Deductions and Charges from the Account Value....................... 17
Monthly Deduction Amounts......................................... 17
Charges Against the Funds......................................... 19
Taxes............................................................. 20
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 3
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
THE COMPANY........................................................... 20
SEPARATE ACCOUNT VL II................................................ 20
General............................................................. 20
Funds............................................................... 20
Hartford Funds.................................................... 20
Putnam Funds...................................................... 21
Fidelity VIP Funds................................................ 21
Investment Adviser.................................................. 23
Hartford Funds.................................................... 23
Putnam Funds...................................................... 23
Fidelity VIP Funds................................................ 23
THE FIXED ACCOUNT..................................................... 23
OTHER MATTERS......................................................... 24
Voting Rights....................................................... 24
Statements to Policy Owners......................................... 24
Limit on Right to Contest........................................... 24
Misstatement as to Age.............................................. 24
Payment Options..................................................... 24
Beneficiary......................................................... 25
Assignment.......................................................... 25
Dividends........................................................... 25
SUPPLEMENTAL BENEFITS................................................. 25
Last Survivor Exchange Option Rider................................. 25
Estate Protection Rider............................................. 25
Maturity Date Extension Rider....................................... 25
Yearly Renewable Term Life Insurance Rider.......................... 25
EXECUTIVE OFFICERS AND DIRECTORS...................................... 26
DISTRIBUTION OF THE POLICIES.......................................... 27
SAFEKEEPING OF SEPARATE ACCOUNT VL II'S ASSETS........................ 27
FEDERAL TAX CONSIDERATIONS............................................ 28
General............................................................. 28
Taxation of Hartford and the Separate Account....................... 28
Income Taxation of Policy Benefits.................................. 28
Modified Endowment Contracts........................................ 29
Estate and Generation Skipping Taxes................................ 29
Diversification Requirements........................................ 29
Ownership of the Assets in the Separate Account..................... 30
Life Insurance Purchased for Use in Split Dollar Arrangements....... 30
Federal Income Tax Withholding...................................... 30
Non-Individual Ownership of Policies................................ 30
Other............................................................... 31
Life Insurance Purchases by Nonresident Aliens and Foreign
Corporations....................................................... 31
LEGAL PROCEEDINGS..................................................... 31
LEGAL MATTERS......................................................... 31
EXPERTS............................................................... 31
REGISTRATION STATEMENT................................................ 31
APPENDIX A -- ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES AND CASH
SURRENDER VALUES.................................................... 32
FINANCIAL STATEMENTS..................................................
</TABLE>
THE POLICIES MAY NOT BE AVAILABLE IN ALL STATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER OR OTHER PERSON IS AUTHORIZED
TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON.
<PAGE>
4 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
ACCOUNT VALUE: Value used to determine certain Policy benefits and charges.
ACCUMULATION UNIT: An accounting unit of measure used to calculate the value of
a Sub-Account.
ANNUAL DEATH BENEFIT GUARANTEE PREMIUM: An annual amount of premium shown in the
Policy's specifications page required to keep the Death Benefit guarantee in
effect and used to calculate the Cumulative Death Benefit Guarantee Premium.
ATTRIBUTABLE: In calculating the front-end sales load, agent commissions and
mortality and expense risk charge, premiums (in the case of the front-end sales
load or commissions) and Account Value (in the case of the mortality and expense
risk charge) are Attributable to the Basic Face Amount and Supplemental Face
Amount in the same ratio that the initial Basic Face Amount and the initial
Supplemental Face Amount, respectively, bear to the initial Face Amount. For
example, if 60% of Your initial Face Amount represented Basic Face Amount and
40% represented Supplemental Face Amount, then 60% of each premium (in the case
of the sales load or commissions) or 60% of Your Account Value (in the case of
the mortality and expense risk charge) is Attributable to Basic Face Amount and
the remaining 40% is Attributable to Supplemental Face Amount.
BASIC FACE AMOUNT: On the Policy Date, the Basic Face Amount equals the initial
Basic Face Amount. Thereafter it may change in accordance with the terms of the
Policy.
CASH SURRENDER VALUE: Account Value less all Indebtedness.
CODE: The Internal Revenue Code of 1986, as amended.
COST OF INSURANCE: An amount deducted as part of the Monthly Deduction Amount to
help cover Hartford's anticipated mortality costs and other expenses.
CUMULATIVE DEATH BENEFIT GUARANTEE PREMIUM: The sum of the number of completed
Policy Years plus the completed portion of the current Policy Year (expressed as
the number of completed months divided by 12), multiplied by the Annual Death
Benefit Guarantee Premium.
DATE OF ISSUE: The date from which the suicide and incontestability provisions
are measured.
DEATH BENEFIT: On the Policy Date, the Death Benefit equals the Face Amount.
Thereafter it may change in accordance with the terms of the Policy.
DEATH BENEFIT OPTION: The Death Benefit Option in effect determines how the
Death Benefit is calculated. The three Death Benefit Options provided are
described in the "Death Benefit" section of this Prospectus.
DEATH PROCEEDS: The amount which We will pay on the death of the last surviving
Insured. This amount equals the Death Benefit less any Indebtedness and less any
due and unpaid Monthly Deduction Amount occurring during a grace period.
FACE AMOUNT: The Basic Face Amount plus the Supplemental Face Amount.
FIXED ACCOUNT: Portion of Account Value invested in the General Account of
Hartford.
FUNDS: The registered open-end management investment companies in which assets
of the Separate Account may be invested.
GENERAL ACCOUNT: All assets of Hartford other than those allocated to its
separate accounts.
GUIDELINE ANNUAL PREMIUM: The level annual premium payment necessary to provide
the future benefits under the Policy through maturity, based on certain
assumptions specified under the federal securities laws. These assumptions
include mortality charges based on the 1980 Commissioners' Standard Ordinary
Mortality Smoker or Nonsmoker Table, age last birthday, an assumed annual net
rate of return of 5% per year, and deduction of the guaranteed fees and charges
specified in the Policy. For purposes of the Policy, the Guideline Annual
Premium is used only in limiting front-end sales loads.
HARTFORD (ALSO "WE," "US," "OUR"): Hartford Life Insurance Company.
IN WRITING: In a written form satisfying to Us.
INDEBTEDNESS: The outstanding loan on the Policy, including any interest due or
accrued.
INSUREDS: The two persons on whose lives the Policy is issued.
ISSUE AGE: As of the Policy Date, the age of each Insured on his/her last
birthday.
LOAN ACCOUNT: An account established for any amounts transferred from the Fixed
Account and Sub-Accounts as a result of loans. Amounts are held as collateral
and are credited with interest. Amounts are not subject to the investment
experience of the Separate Account.
MATURITY DATE: The date on which the Policy will mature.
MONTHLY ACTIVITY DATE: The Policy Date and the same date in each succeeding
month as the Policy Date, except that whenever the Monthly Activity Date falls
on a date other than a Valuation Day, the Monthly Activity Date will be deemed
the next Valuation Day.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 5
- --------------------------------------------------------------------------------
MONTHLY DEDUCTION AMOUNT: The fees and charges deducted from the Account Value
on the Monthly Activity Date.
NATIONAL SERVICE CENTER: Located in Minneapolis, Minnesota.
NET PREMIUM: The amount of premium actually credited to the Account Value.
PLANNED PREMIUMS: The amount of premiums that You intend to pay as indicated on
the application and shown on the Policy's specifications page.
POLICY: A last survivor flexible premium variable life insurance contract issued
by Hartford, as described in this Prospectus.
POLICY ANNIVERSARY: An anniversary of the Policy Date.
POLICY DATE: The date from which Policy Anniversaries and Policy Years are
determined.
POLICY OWNER (ALSO "YOU," "YOUR"): The person having rights to benefits under
the Policy during the lifetime of the two Insureds; the Policy Owner may or may
not be one of the Insureds.
POLICY YEARS: Annual periods computed from the Policy Date.
PRO RATA BASIS: An allocation method based on the proportion of the Account
Value in the Fixed Account and each Sub-Account.
SEPARATE ACCOUNT (ALSO "SEPARATE ACCOUNT VL II"): An account established by
Hartford to separate the assets funding the Policies from other assets of
Hartford; in this case, "Separate Account VL II."
SUB-ACCOUNT: The subdivisions of the Separate Account.
SUPPLEMENTAL FACE AMOUNT: On the Policy Date, the Supplemental Face Amount is
shown on the Policy's specifications page. Thereafter, the Supplemental Face
Amount may change according to the terms of the Policy.
TARGET PREMIUM: The amount of level premium required to support a whole life
insurance policy with a net interest rate of 5%, assuming that the initial Face
Amount is entirely Basic Face Amount. The Policy charges used in determining the
level premium amount are maximum guaranteed cost of insurance rates for standard
risks, actual premium tax rates, a 1.25% premium charge for processing, a 1.25%
premium charge for federal tax and other maximum policy deductions or charges,
exclusive of any additional rider charges.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Separate Account is determined at the close of the New York Stock
Exchange (currently 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of business on successive
Valuation Days.
<PAGE>
6 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- -------------------------------------------
SUMMARY
- -------------------------------- THE POLICY
The last survivor flexible premium variable life insurance Policies offered
by this Prospectus are funded by a Fixed Account and Separate Account VL II, a
separate account established by Hartford pursuant to Connecticut insurance law
and organized as a unit investment trust registered under the Investment Company
Act of 1940. Separate Account VL II is presently comprised of 22 sub-accounts
(the "Sub-Accounts" and each individually a "Sub-Account"), each of which
invests exclusively in one of the underlying Funds. If an initial premium is
submitted with an application for a Policy, it will be allocated to the Hartford
Money Market Sub-Account. At a later date, the values in the Hartford Money
Market Sub-Account will be allocated to one or more of the Sub-Accounts or the
Fixed Account, as specified in the Policy Owner's application. This later date
is the latest of 45 days after the application is signed, ten days after We mail
or personally delivery a Notice of Withdrawal Right, ten days after We receive
the premium and the date We receive the final requirement to put the Policy in
force. The Policies are credited with units ("Accumulation Units") in each
selected Sub-Account, the assets of which are invested in the applicable Fund. A
Policy Owner may transfer the funds among the Sub-Accounts and the Fixed Account
subject to a transfer charge. See "Detailed Description of Policy Benefits and
Provisions -- Transfers of Account Value," page 11.
The Policies are first and foremost life insurance policies with death
benefits, cash values, and other features traditionally associated with life
insurance. The Policies are called "last survivor" because the Death Proceeds
are paid on the death of the last surviving Insured. The Policies are called
"flexible premium" because, once the desired level and pattern of death benefits
have been determined, a Purchaser has considerable flexibility in choosing the
timing and amount of premium to be paid. The Policies are called "variable"
because, unlike the fixed benefits of an ordinary whole life insurance policy,
the Account Value will, and the Death Benefit may, increase or decrease
depending on the investment experience of the Funds to which the Net Premium(s)
has been allocated.
- ---------------------------------------------------
POLICY DESIGN OPTIONS
The options in the Policy are structured to give a prospective purchaser and
his or her sales agent the ability to select a Policy tailor-made for the
purchaser's specific life insurance needs.
The Policy options which give the Policy Owner such flexibility fall into
three major categories:
1. Death Benefit Options -- These allow the Policy Owner to select various
levels and patterns of Death Benefits.
2. Investment Options -- Currently, the Policy Owner has the choice of
allocating the Policy's Account Value among up to nine of the Policy's 23
investment options. (Hartford reserves the right to increase the number of
allocable investment options to more than nine.) These include the 22
variable Sub-Accounts and the Fixed Account.
3. Premium Options -- The Policy Owner has the flexibility to choose, within
limits, the amount of the initial premium and the amount and frequency of
subsequent premiums.
- ---------------------------------------------------
DEATH BENEFIT
The Policies provide for three Death Benefit Options. These can be level and
equal to the Face Amount ("Option A"), the Face Amount plus Return of Account
Value ("Option B") or the Face Amount plus Return of Premium ("Option C"). At
the death of the last surviving Insured, We will pay the Death Proceeds to the
beneficiary. The Death Proceeds equal the Death Benefit less any Indebtedness
under the Policy and less any due and unpaid Monthly Deduction Amount occurring
during a grace period. You may also select Supplemental Face Amount coverage in
the application. Scheduled and unscheduled increases in Face Amount may be
requested. See "Detailed Description of Policy Benefits and Provisions -- Death
Benefit," page 13.
- ---------------------------------------------------
PREMIUM
You have considerable flexibility as to when and in what amounts You pay
premiums.
Prior to issue, You can choose a Planned Premium, within a range determined
by Hartford based on the Face Amount and each Insured's sex (except where unisex
rates apply), Issue Age and risk classification.
The Policy will not lapse as long as the Cash Surrender Value is sufficient
to cover the Monthly Deduction Amounts or the Death Benefit guarantee is in
effect.
The minimum subsequent premium is $50. We reserve the right to refund the
excess premium payments that would cause the Policy not to meet the tax
qualification guidelines for life insurance under the Code.
There are circumstances (usually if a Policy Owner wants to prefund future
benefits in seven years or less) when the Policy may become a Modified Endowment
Contract under federal tax law. If it does, loans and other predeath
distributions are includable in gross income on an income-
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 7
- --------------------------------------------------------------------------------
first basis. A 10% penalty tax may be imposed on income distributed before the
Policy Owner attains age 59 1/2. Prospective purchasers and Policy Owners are
advised to consult a qualified tax adviser before taking steps that may affect
whether the Policy becomes a Modified Endowment Contract. See "Federal Tax
Considerations -- Modified Endowment Contracts," page 29, for a discussion of
the "seven-pay test".
- ---------------------------------------------------
SEPARATE ACCOUNT VL II
Separate Account VL II is a separate account established by Hartford
pursuant to the insurance laws of the State of Connecticut and organized as a
registered unit investment trust under the Investment Company Act of 1940.
Separate Account VL II meets the definition of "separate account" under federal
securities law. Separate Account VL II is comprised of Sub-Accounts, each of
which invests exclusively in one of the Funds. Each Hartford Fund is organized
as a corporation under the laws of the State of Maryland and is a diversified
open-end management investment company registered under the Investment Company
Act of 1940. The Putnam Funds are portfolios of Putnam Variable Trust (formerly
named Putnam Capital Manager Trust), a Massachusetts business trust organized on
September 24, 1987 that is an open-end, series investment company with multiple
portfolios or funds registered under the Investment Company Act of 1940. The
Fidelity VIP Funds are portfolios of the Variable Insurance Products Fund and
the Variable Insurance Products Fund II, two diversified open-end management
investment companies, each with multiple portfolios and organized as a
Massachusetts business trust. The VIP Equity-Income Portfolio and VIP Overseas
Portfolio are portfolios of the Variable Insurance Products Fund, organized on
November 13, 1981. The VIP II Asset Manager Portfolio is a portfolio of the
Variable Insurance Products Fund II, organized on March 21, 1988. Registration
under the Investment Company Act of 1940 does not involve supervision of the
management or investment practices or policies by the Securities and Exchange
Commission ("SEC"). The shares of the Funds are sold to Separate Account VL II
and to other separate accounts of Hartford or its affiliates which fund similar
annuity or life insurance products.
Currently, the Funds are Hartford Advisers Fund, Inc., Hartford Bond Fund,
Inc., Hartford Capital Appreciation Fund, Inc., Hartford Dividend and Growth
Fund, Inc., Hartford Index Fund, Inc., Hartford International Opportunities
Fund, Inc., Hartford Mortgage Securities Fund, Inc., Hartford Stock Fund, Inc.
and HVA Money Market Fund, Inc.; Putnam VT Diversified Income Fund, Putnam VT
Global Asset Allocation Fund, Putnam VT Global Growth Fund, Putnam VT Growth and
Income Fund, Putnam VT High Yield Fund, Putnam VT Money Market Fund, Putnam VT
New Opportunities Fund, Putnam VT U.S. Government and High Quality Bond Fund,
Putnam VT Utilities Growth and Income Fund and Putnam VT Voyager Fund; and the
VIP Equity-Income Portfolio, VIP Overseas Portfolio and VIP II Asset Manager
Portfolio. Applicants should read the prospectus for each of the Funds
accompanying this Prospectus in connection with the purchase of a Policy. The
investment objectives of each of the Funds are as set forth in "Separate Account
VL II," page 20.
The investment adviser for the Hartford Funds is HL Investment Advisors,
Inc. ("HL Advisors"), a wholly-owned subsidiary of Hartford. HL Advisors retains
Wellington Investment Management, L.L.P. ("Wellington Management") as an
investment sub-adviser with respect to certain of the Hartford Funds. In
addition, HL Advisors has entered an investment services agreement with Hartford
Investment Management Company, Inc. ("HIMCO") for the provision of investment
services for certain of the Hartford Funds. The Putnam Funds are advised by
Putnam Investment Management, Inc., a subsidiary of Putnam Investments, Inc. The
Fidelity VIP Funds are managed by Fidelity Management & Research Company. See
"Separate Account VL II," page 20.
- ---------------------------------------------------
FIXED ACCOUNT
Premium payments and Account Values allocated to the Fixed Account become
part of the general assets of Hartford. Hartford invests the assets of the
General Account in accordance with applicable law governing the investments of
insurance company general accounts.
- ---------------------------------------------------
DEDUCTIONS FROM THE PREMIUM
Before the allocation of the premium to the Account Value, a deduction as a
percentage of premium is made for the premium processing charge, premium tax and
federal tax charge and front-end sales load. The amount of each premium
allocated to the Account Value is Your Net Premium.
- ---------------------------------------------------
PREMIUM PROCESSING CHARGE
A 1.25% charge is deducted from each premium payment for premium collection
costs and premium and Policy processing costs.
- ---------------------------------------------------
PREMIUM TAX CHARGE AND FEDERAL TAX CHARGE
We deduct as a premium tax charge a percentage of each premium to cover
premium-based taxes assessed against Hartford by a state or other governmental
entity. This percentage will vary by locale depending on the tax rates in effect
there and is based on the actual tax imposed. The range is generally between 0%
and 4%.
<PAGE>
8 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
We also deduct a current charge of 1.25% of each premium for federal taxes
imposed under Section 848 of the Code.
- ---------------------------------------------------
FRONT-END SALES LOAD
The front-end sales load is a charge deducted from each premium. The current
and maximum front-end sales load for premiums Attributable to the Basic Face
Amount up to the Target Premium is 50% in the first Policy Year, 15% in Policy
Years 2 through 5, 10% in Policy Years 6 through 10, and 2% in Policy Years 11
through 20. After Policy Year 20, the current front-end sales load is 0%, with a
maximum of 2%.
The current and maximum front-end sales load for premiums Attributable to
the Basic Face Amount in excess of the Target Premium is 9% in Policy Year 1, 4%
in Policy Years 2 through 10 and 2% in Policy Years 11 through 20. After Policy
Year 20, the current front-end sales load is 0%, with a maximum of 2%.
The current and maximum front-end sales load for all premiums Attributable
to the Supplemental Face Amount is 4% in Policy Years 1 through 10 and 2% in
Policy Years 11 through 20. After Policy Year 20, the current front-end sales
load is 0%, with a maximum of 2%.
Front-end sales loads which cover expenses relating to the sale and
distribution of the Policies may be reduced for certain sales of the Policies
under circumstances which may result in savings of such sales and distribution
expenses.
- ---------------------------------------------------
DEDUCTIONS AND CHARGES FROM
THE ACCOUNT VALUE
We will subtract amounts from Your Account Value to provide for the Monthly
Deduction Amount. These will be taken on a Pro Rata Basis from the Fixed Account
and Sub-Accounts on each Monthly Activity Date.
The Monthly Deduction Amount equals:
(a) the Cost of Insurance; plus
(b) the charges for additional benefits provided by rider, if any; plus
(c) the charges for "special" insurance class rating, if any; plus
(d) the monthly administrative fee and issue charge; plus
(e) the mortality and expense risk charge, plus
(f) any Face Amount increase fee.
Hartford may also set up a provision for income taxes against the assets of
Separate Account VL II. See "Detailed Description of Policy Benefits and
Provisions -- Deductions and Charges from the Account Value," page 17, and
"Federal Tax Considerations," page 28.
Applicants should review the prospectuses for the Funds which accompany this
Prospectus for a description of the charges assessed against the assets of each
of the Funds.
- ---------------------------------------------------
ACCOUNT VALUE
As with many other types of insurance policies, each Policy will have a cash
value ("Account Value"). The Account Value of the Policy will increase or
decrease to reflect the interest credited to the Fixed Account and Loan Account,
the investment experience of the Sub-Accounts applicable to the Policy and
deductions for the Monthly Deduction Amount. There is no minimum guaranteed
Account Value and the Policy Owner bears the risk of the investment in the
Funds. However, if the Death Benefit guarantee is in effect, the Policy will not
lapse due to poor investment performance. See "Detailed Description of Policy
Benefits and Provisions -- Premiums -- Account Values," page 11.
- ---------------------------------------------------
POLICY LOAN
A Policy Owner may obtain a cash loan from Hartford. The loan is secured by
the Policy. At the time a loan is requested, the Indebtedness (including the
currently applied for loan) may not exceed 90% of the Account Value. See
"Detailed Description of Policy Benefits and Provisions -- Policy Loans," page
12.
- ---------------------------------------------------
CHARGES AGAINST THE FUNDS
Separate Account VL II purchases shares of the Funds at net asset value. The
net asset value of the Fund shares reflects investment advisory fees and
administrative and other expenses already deducted from the assets of the Funds.
These charges are described herein. See "Detailed Description of Policy Benefits
and Provisions -- Deductions and Charges From the Account Value -- Charges
Against the Funds," page 19.
The following table shows total fund operating expenses for the year ended
December 31, 1996 for the Funds:
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FUND NAME FEES EXPENSES EXPENSES
- --------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Hartford Advisers Fund........... 0.615% 0.017% 0.632%
Hartford Bond Fund............... 0.490% 0.030% 0.520%
Hartford Capital Appreciation
Fund............................ 0.629% 0.017% 0.646%
Hartford Dividend and Growth
Fund............................ 0.709% 0.017% 0.726%
Hartford Index Fund.............. 0.374% 0.019% 0.393%
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER OPERATING
FUND NAME FEES EXPENSES EXPENSES
- --------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Hartford International
Opportunities Fund.............. 0.691% 0.095% 0.786%
Hartford Mortgage Securities
Fund............................ 0.424% 0.029% 0.453%
Hartford Stock Fund.............. 0.441% 0.016% 0.457%
HVA Money Market Fund............ 0.423% 0.021% 0.444%
Putnam VT Diversified Income
Fund............................ 0.70% 0.13% 0.83%
Putnam VT Global Asset Allocation
Fund............................ 0.68% 0.15% 0.83%
Putnam VT Global Growth Fund..... 0.60% 0.16% 0.76%
Putnam VT Growth and Income
Fund............................ 0.49% 0.05% 0.54%
Putnam VT High Yield Fund........ 0.68% 0.08% 0.76%
Putnam VT Money Market Fund
(1)............................. 0.45% 0.10% 0.55%
Putnam VT New Opportunities
Fund............................ 0.63% 0.09% 0.72%
Putnam VT US Government and High
Quality Bond Fund............... 0.62% 0.07% 0.69%
Putnam VT Utilities Growth and
Income Fund (2)................. 0.69% 0.09% 0.78%
Putnam VT Voyager Fund........... 0.57% 0.06% 0.63%
Fidelity VIP Equity-Income
Portfolio (3)................... 0.51% 0.07% 0.58%
Fidelity VIP Overseas Portfolio
(3)............................. 0.76% 0.17% 0.93%
Fidelity VIP II Asset Manager
Portfolio (3)................... 0.64% 0.10% 0.74%
</TABLE>
- ------------------------
(1) Other expenses for Putnam VT Money Market Fund have been restated to reflect
the cost of certain insurance purchased by such Fund. See "Putnam VT Money
Market Fund -- Insurance" in the Fund's prospectus accompanying this
Prospectus. Actual other expenses and total Fund operating expenses were
0.08% and 0.53%, respectively.
(2) On July 11, 1996, shareholders approved an increase in the fees payable to
Putnam Management under the management contract for Putnam VT Utilities
Growth and Income Fund. The management fees and total expenses shown in the
table have been restated to reflect the increase. Actual management fees and
total expenses were 0.64% and 0.73%, respectively.
(3) A portion of the brokerage commissions that certain Funds pay was used to
reduce Fund expenses. In addition, certain Funds have entered into
arrangements with their custodian and transfer agent whereby interest earned
on uninvested cash balances was used to reduce custodian and transfer agent
expenses. Absent these reductions, the total operating expenses presented in
the table would have been 0.56% for Fidelity VIP Equity Income Portfolio,
0.92% for Fidelity VIP Overseas Portfolio and 0.73% for Fidelity VIP II
Asset Manager Portfolio.
- ---------------------------------------------------
THE RIGHT TO EXAMINE OR EXCHANGE THE POLICY
An applicant has a limited right to return his or her Policy for
cancellation. If the applicant returns the Policy within ten days after delivery
of the Policy, ten days after We mail or personally deliver a Notice of
Withdrawal Right or within 45 days after completion of the application,
whichever is latest (subject to applicable state regulation), Hartford will
return to the applicant, within seven days thereafter, the greater of the
premium paid, less any Indebtedness, or the sum of (1) the Account Value, less
any Indebtedness, on the date the returned Policy is received by Hartford or its
agent and (2) any deductions under the Policy or by the Funds for taxes, charges
or fees.
In addition, once the Policy is in effect it may be exchanged during the
first 24 months after its Date of Issue for a non-variable last survivor life
insurance policy offered by Us on the life of the Insureds without submitting
proof of insurability.
- ---------------------------------------------------
SURRENDER
At any time prior to the Maturity Date, provided the Policy has a Cash
Surrender Value, You may surrender the Policy. See "Detailed Description of
Policy Benefits and Provisions -- Surrender," page 15.
- ---------------------------------------------------
TAX CONSEQUENCES
The current federal tax law generally excludes all Death Benefit payments
from the gross income of the Policy beneficiary. See "Federal Tax
Considerations," page 28.
- ---------------------------------------------------
DETAILED DESCRIPTION OF POLICY
BENEFITS AND PROVISIONS
- -------------------------------- GENERAL
This Prospectus describes a last survivor flexible premium variable life
insurance Policy where the Policy Owner has considerable flexibility in
selecting the timing and amount of premium payments.
<PAGE>
10 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- ---------------------------------------------------
PREMIUMS
PREMIUM PAYMENT FLEXIBILITY
You have considerable flexibility as to when and in what amounts You pay
premiums.
Prior to issue, You can choose a Planned Premium, within a range determined
by Hartford based on the Face Amount and each Insured's sex (except where unisex
rates apply), Issue Age and risk classification. We will send You premium
notices for Planned Premiums. The notices may be sent on an annual, semi-annual
or quarterly basis. You may also have premiums automatically deducted monthly
from Your checking account. The Planned Premiums and payment mode You selected
are shown on the Policy's specifications page. You may change the Planned
Premiums, subject to Our minimum amount rules then in effect.
The Policy will not lapse as long as the Cash Surrender Value is sufficient
to cover the Monthly Deduction Amounts or the Death Benefit guarantee is in
effect.
See, also, "-- Lapse and Reinstatement," page 14, for more details.
ALLOCATION OF PREMIUM PAYMENTS
The initial Net Premium will be allocated to the Hartford Money Market
Sub-Account on the later of the Policy Date or the date We receive the premium.
The value in the Hartford Money Market Sub-Account will then be allocated to
the Fixed Account and Sub-Accounts according to the premium allocation specified
in the application on the latest of 45 days after the application is signed, ten
days after We receive the premium, ten days after We mail or personally deliver
a Notice of Withdrawal Right and the date We receive the final requirement to
put the Policy in force.
Any additional Net Premiums received by Us prior to such date will be
allocated to the Hartford Money Market Sub-Account.
Upon written request, You may change the premium allocation. Portions
allocated to the Fixed Account and Sub-Accounts must be whole percentages of 10%
or more. Subsequent Net Premiums will be allocated to the Fixed Account and
Sub-Accounts according to Your most recent instructions, subject to the
following: Currently, the Account Value may be allocated to no more than nine
Sub-Accounts. (Hartford reserves the right to increase the number of allocable
investment options to more than nine.) If We receive a premium and Your most
recent allocation instructions would violate this requirement, We will allocate
the Net Premium to the Fixed Account and Sub-Accounts on a Pro Rata Basis.
The Policy Owner receives several different types of notification as to what
his or her current premium allocation is. The initial allocation chosen by the
Policy Owner is shown in the Policy, and each transactional confirmation
received after a premium payment will show how that Net Premium has been
allocated. In addition, each quarterly statement summarizes the current premium
allocation in effect for that Policy.
ACCUMULATION UNITS
Net Premiums allocated to the Sub-Accounts are used to credit Accumulation
Units to those Sub-Accounts.
The number of Accumulation Units in each Sub-Account to be credited to a
Policy (including the initial allocation to Hartford Money Market Sub-Account)
and the amount credited to the Fixed Account will be determined first by
multiplying the Net Premium by the appropriate allocation percentage to
determine the portion to be invested in the Fixed Account or Sub-Account. Each
portion to be invested in a Sub-Account is then divided by the Accumulation Unit
Value of that particular Sub-Account next computed following receipt of the
payment.
ACCUMULATION UNIT VALUES
The Accumulation Unit Value for each Sub-Account will vary to reflect the
investment experience of the applicable Fund and will be determined on each
Valuation Day by multiplying the Accumulation Unit Value of the particular
Sub-Account on the preceding Valuation Day by a Net Investment Factor for that
Sub-Account for the Valuation Period then ended. The Net Investment Factor for
each of the Sub-Accounts is equal to the net asset value per share of the
corresponding Fund at the end of the Valuation Period (plus the per share amount
of any dividend or capital gain distributions paid by that Fund in the Valuation
Period then ended) divided by the net asset value per share of the corresponding
Fund at the beginning of the Valuation Period.
All valuations in connection with a Policy, e.g., with respect to
determining Account Value, in connection with Policy loans, or in calculation of
Death Benefits, or with respect to determining the number of Accumulation Units
to be credited to a Policy with each premium payment, other than the initial
premium payment, will be made on the date the request or payment is received by
Hartford at the National Service Center if such date is a Valuation Day;
otherwise such determination will be made on the next succeeding date which is a
Valuation Day.
PREMIUM LIMITATION
If premiums are received which would cause the Policy to fail to meet the
definition of a life insurance policy in accordance with the Code, We reserve
the right to refund the excess premium payments. We will refund such premium
payments and interest thereon within 60 days after the end of a Policy Year.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 11
- --------------------------------------------------------------------------------
A premium payment that results in an increase in the Death Benefit greater
than the amount of the premium will be accepted only after We approve evidence
of insurability.
ACCOUNT VALUES
As with traditional life insurance, each Policy will have an Account Value.
There is no minimum guaranteed Account Value.
The Account Value of a Policy changes on a daily basis and will be computed
on each Valuation Day. The Account Value will vary to reflect the investment
experience of the Sub-Accounts, and the interest credited to the Fixed Account
and Loan Account as well as the Monthly Deduction Amounts.
The Account Value of a particular Policy is related to the net asset value
of the Funds associated with the Sub-Accounts, if any, to which Net Premiums on
the Policy have been allocated. The Account Value in the Sub-Accounts on any
Valuation Day is calculated by multiplying the number of Accumulation Units in
each Sub-Account as of the Valuation Day by the current Accumulation Unit Value
of that Sub-Account and then summing the result for all the Sub-Accounts. The
Account Value of a Policy equals the Account Value in the Sub-Accounts plus the
value of the Fixed and Loan Accounts. The Cash Surrender Value, which is the net
amount available upon surrender of the Policy, is the Account Value less any
Indebtedness. See "-- Premiums -- Accumulation Unit Values," page 10.
AMOUNT PAYABLE ON SURRENDER OF THE POLICY
As long as the Policy is in effect, a Policy Owner may elect, without the
consent of the beneficiary (provided the designation of beneficiary is not
irrevocable), to fully surrender the Policy. Upon surrender, the Policy Owner
will receive the Cash Surrender Value determined as of the day Hartford receives
the Policy Owner's written request or the date requested by the Policy Owner,
whichever is later. The Cash Surrender Value equals the Account Value less any
Indebtedness. The Policy will terminate on the date of receipt of the written
request, or the date the Policy Owner requests the surrender to be effective,
whichever is later.
LOAD REFUND
If a Policy is surrendered during the first two Policy Years, the Policy
Owner may be entitled to payment of a refund in addition to the Cash Surrender
Value.
The refund will be equal to the excess, if any, of the sum of the actual
front-end sales load charged to date over:
1. the sum of 30% of payments in aggregate amount less than or equal to one
Guideline Annual Premium plus 10% of payments in aggregate amount greater
than one Guideline Annual Premium but not more than two Guideline Annual
Premiums; and
2. 9% of each payment made in excess of two Guideline Annual Premiums.
PARTIAL WITHDRAWALS
One (1) partial withdrawal is allowed per month (between any successive
Monthly Activity Dates). The minimum partial withdrawal allowed is $500. The
maximum partial withdrawal is the Cash Surrender Value, less $1,000. If the
Death Benefit Option then in effect is Option A or Option C, the Face Amount is
reduced by the amount of the Partial Withdrawal. The minimum Face Amount
required after a partial withdrawal is subject to Our rules then in effect.
Unless specified otherwise, the Partial Withdrawal will be deducted on a Pro
Rata Basis from the Fixed Account and the Sub-Accounts. Currently, Hartford does
not impose a partial withdrawal charge. However, Hartford reserves the right to
impose a partial withdrawal charge of up to $50.
- ---------------------------------------------------
TRANSFERS OF ACCOUNT VALUE
AMOUNT AND FREQUENCY OF TRANSFERS
Upon request and as long as the Policy is in effect, You may transfer
amounts among the Fixed Account and Sub-Accounts. Transfers may be made by
request In Writing or by calling Our National Service Center toll free at
1-800-231-5453. Transfers by telephone may be made by the agent of record or by
the attorney-in-fact pursuant to a power of attorney. Telephone transfers may
not be permitted in some states. The policy of Hartford and its agents and
affiliates is that they will not be responsible for losses resulting from acting
upon telephone requests reasonably believed to be genuine. We will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine; otherwise, We may be liable for any losses due to unauthorized or
fraudulent instructions. The procedures We follow for transactions initiated by
telephone include requirements that callers provide certain identifying
information for themselves (if not the Policy Owner) and the Policy Owner. All
transfer instructions by telephone are tape recorded.
The amounts which may be transferred and the number of transfers will be
limited by Our rules then in effect.
Currently there are no restrictions on transfers other than those described
below. There is no charge currently for the first four (4) transfers in any
Policy Year. Each subsequent transfer is subject to a Transfer Charge of up to
$25.
We reserve the right at a future date to limit the size of transfers and
remaining balances, and to limit the number and frequency of transfers.
TRANSFERS TO OR FROM SUB-ACCOUNTS
In the event of a transfer from a Sub-Account, the number of Accumulation
Units credited to the Sub-Account
<PAGE>
12 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
from which the transfer is made will be reduced. The reduction will be
determined by dividing:
1. the amount transferred by,
2. the Accumulation Unit Value for that Sub-Account determined as of the next
Valuation Day after We receive Your request for transfer In Writing.
In the event of a transfer to a Sub-Account, We will increase the number of
Accumulation Units credited to the Sub-Account. The increase will equal:
1. the amount transferred divided by,
2. the Accumulation Unit Value for that Sub-Account determined as of the next
Valuation Day after We receive Your request for transfer In Writing.
TRANSFERS FROM THE FIXED ACCOUNT
In addition to the conditions above, transfers from the Fixed Account are
subject to the following:
(a) the transfer must occur during the 30-day period following each Policy
Anniversary; and
(b) if the accumulated value in Your Fixed Account exceeds $1,000, the amount
transferred in any Policy Year may be no larger than 25% of the accumulated
value in the Fixed Account on the date of transfer.
DOLLAR COST AVERAGING OPTION
You may elect to allocate Your Net Premiums among the Sub-Accounts and the
Fixed Account pursuant to the dollar cost averaging (DCA) option. If You choose
the DCA option, Net Premiums will be deposited into the Hartford Money Market
Sub-Account. Each month, amounts will be withdrawn from that Sub-Account and
allocated to the other investment options according to Your allocation
instructions. The transfer date will be the monthly anniversary of Your first
transfer under Your initial DCA election. The first transfer will commence
within five business days after Hartford receives Your initial election, either
In Writing or by telephone, subject to the telephone transfer procedures
described above. The dollar amount will be allocated to the investment options
that You specify, in the proportions that You specify. If, on any transfer date,
Your Cash Value allocated to the Hartford Money Market Account is less than the
amount You have elected to transfer, Your DCA program will end. You may also
cancel Your DCA election by notice In Writing to Hartford or by calling Our
National Service Center at 1-800-231-5453.
The main objective of a DCA program is to minimize the impact of short-term
price fluctuations. Since the same dollar amount is transferred to other
investment options at set intervals, DCA allows You to purchase more
Accumulation Units when prices are low and fewer Accumulation Units when prices
are high. Therefore, a lower average cost per Accumulation Unit may be achieved
over the long-term. A DCA program allows Policy Owners to take advantage of
market fluctuations. However, it is important to understand that a DCA program
does not assure a profit or protect against loss in a declining market. Policy
Owners who choose the DCA option should be individuals who have the financial
ability to continue making investments through periods of low price levels.
- ---------------------------------------------------
POLICY LOANS
As long as the Policy is in effect, a Policy Owner may obtain, without the
consent of the beneficiary (provided the designation of beneficiary is not
irrevocable), a cash loan from Hartford. The total Indebtedness at the time of
the new loan (including the accrued interest on prior loans plus the currently
applied for loan) may not exceed 90% of the Account Value.
The amount of each loan will be transferred on a Pro Rata Basis from the
Fixed Account and each of the Sub-Accounts (unless the Policy Owner specifies
otherwise) to the Loan Account. The Loan Account is a mechanism used to ensure
that any outstanding Indebtedness remains fully secured by the Account Value.
LOAN INTEREST
Interest will accrue daily on the Indebtedness at the Policy Loan Rate,
which is the interest rate as shown in the Policy. The difference between the
value of the Loan Account and the Indebtedness will be transferred on a Pro Rata
Basis from the Fixed Account and Sub-Accounts to the Loan Account on each
Monthly Activity Date.
CREDITED INTEREST
A Loan Account, other than a Loan Account established pursuant to a
Preferred Loan as described in the subsection entitled "Policy Loans --
Preferred Loan," will be credited with interest in the following manner: During
the first ten Policy Years, any amounts in the Loan Accounts will be credited
with interest at the rate of 2% (in most states). For Policy Years 11 and
beyond, a Loan Account will be credited with interest at the rate of 3% (in most
states).
PREFERRED LOAN
If, at any time after the tenth Policy Anniversary, the Account Value
exceeds the total of all premiums paid since issue, a Preferred Loan is
available. The amount available for a Preferred Loan is the amount by which the
Account Value exceeds total premiums paid. The amount of the Loan Account which
equals a Preferred Loan will be credited with interest at a rate equal to 4% (in
most states). The amount of Indebtedness that qualifies as a Preferred Loan is
determined on each Monthly Activity Date.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 13
- --------------------------------------------------------------------------------
LOAN REPAYMENTS
You can repay any part of or the entire Indebtedness at any time while Your
Policy is in force and either of the Insureds is alive. The amount of loan
repayment will be deducted from the Loan Account and will be allocated among the
Fixed Account and Sub-Accounts in the same percentage as premiums are allocated.
TERMINATION DUE TO EXCESSIVE INDEBTEDNESS
If total Indebtedness equals or exceeds the Account Value, the Policy will
terminate 61 days after We have mailed notice to Your last known address and
that of any assignees of record. If sufficient loan repayment is not made by the
end of this 61 day period, the Policy will end without value.
EFFECT OF LOANS ON ACCOUNT VALUE
A loan, whether or not repaid, will have a permanent effect on the Account
Value because the investment results of each Sub-Account will apply only to the
amount remaining in such Sub-Accounts. In addition, the rate of interest
credited to the Fixed Account will usually be different than the rate credited
to the Loan Account. The longer a loan is outstanding, the greater the effect is
likely to be. The effect could be favorable or unfavorable. If the Fixed Account
and Sub-Accounts earn more than the annual interest rate for funds held in the
Loan Account, a Policy Owner's Account Value will not increase as rapidly as it
would have had no loan been made. If the Fixed Account and Sub-Accounts earn
less than the Loan Account, the Policy Owner's Account Value will be greater
than it would have been had no loan been made. Also, if not repaid, the
aggregate amount of the outstanding Indebtedness will reduce the Death Proceeds
and Cash Surrender Value otherwise payable.
- ---------------------------------------------------
DEATH BENEFIT
The Policies provide for the payment of the Death Proceeds to the named
beneficiary when the last surviving Insured under the Policy dies. The Death
Proceeds payable to the beneficiary equal the Death Benefit less any
Indebtedness and less any due and unpaid Monthly Deduction Amount occurring
during a grace period. The Death Benefit depends on the Death Benefit Option
selected by You, the minimum Death Benefit provision, and whether or not the
Death Benefit guarantee is in effect. All or part of the Death Proceeds may be
paid in cash or applied under a "Payment Option." See "Other Matters -- Payment
Options," page 24.
DEATH BENEFIT OPTIONS
There are three Death Benefit Options: the Level Death Benefit Option
("Option A"), the Return of Account Value Death Benefit Option ("Option B") and
the Return of Premium Death Benefit Option ("Option C"). Subject to the minimum
Death Benefit described below, the Death Benefits under each option are:
1. Under Option A, the Death Benefit is the Face Amount.
2. Under Option B, the Death Benefit is the Face Amount plus the Account Value.
3. Under Option C, the Death Benefit is the Face Amount plus the sum of the
premiums paid.
OPTION CHANGE
You may change Your Death Benefit Option to Option A or Option B without
evidence of insurability. If a change to Option A is elected, the Face Amount
will become that amount available as a Death Benefit immediately prior to the
option change. If a change to Option B is elected, the Face Amount will become
that amount available as a Death Benefit immediately prior to the option change,
reduced by the then-current Account Value. Changing your Death Benefit Option
does not result in any Policy fees or charges. However, you should consult a
competent tax adviser regarding the possible adverse tax consequences resulting
from a change in your Death Benefit Option.
Any unscheduled increase in the Face Amount will be deemed an increase in
the Supplemental Face Amount.
DEATH BENEFIT GUARANTEE
If the Death Benefit guarantee is in effect, payment of the Basic Face
Amount upon the death of the last surviving Insured will be guaranteed
regardless of the Policy's investment performance. The Death Benefit guarantee
is in effect if:
(a) the Death Benefit guarantee period has not expired;
(b) the Supplemental Face Amount has never exceeded nor is scheduled to exceed
the Basic Face Amount;
(c) on each Monthly Activity Date, the cumulative premiums paid into the Policy,
less withdrawals from the Policy, equal or exceed the Cumulative Death
Benefit Guarantee Premium.
The Death Benefit guarantee period will expire at the end of: (1) the first
ten Policy Years or (2) the life expectancy of the last surviving Insured (based
on the 1980 Commissioners' Standard Ordinary Mortality Smoker or Nonsmoker
Table, age last birthday), whichever period was chosen under the Policy.
MINIMUM DEATH BENEFIT
Notwithstanding the above, there is a minimum Death Benefit equal to the
Account Value multiplied by a percentage specified in Your Policy. This
percentage varies according to each Insured's Issue Age, the Policy Year, sex
(where unisex rates are not used) and insurance class, but may be increased by
You in the application.
<PAGE>
14 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
EXAMPLES OF THE MINIMUM DEATH BENEFIT:
<TABLE>
<CAPTION>
A B
---------- ----------
<S> <C> <C>
Face Amount............................ $ 100,000 $ 100,000
Account Value on Date of Death......... 46,500 34,000
Specified Percentage................... 250% 250%
Death Benefit Option................... Level Level
</TABLE>
In Example A, the minimum Death Benefit equals $116,250, i.e., the greater
of $100,000 (the Face Amount) or $116,250 (the Account Value at the Date of
Death of $46,500, multiplied by the specified percentage of 250%). This amount
less any outstanding Indebtedness constitutes the Death Proceeds which We would
pay to the beneficiary.
In Example B, the minimum Death Benefit is $100,000, i.e., the greater of
$100,000 (the Face Amount) or $85,000 (the Account Value of $34,000, multiplied
by the specified percentage of 250%).
SUPPLEMENTAL FACE AMOUNT
If You selected Supplemental Face Amount coverage on Your application, the
amount is shown on the Policy's specifications page, subject to any scheduled
changes You instructed in application and any unscheduled changes, as described
below. You may discontinue a scheduled increase by written request. A decrease
in Face Amount, other than as a result of a partial withdrawal, will affect Your
scheduled increases.
UNSCHEDULED INCREASES AND DECREASES IN FACE AMOUNT
At any time after the first Policy Year, You may request In Writing a change
in the Face Amount.
The minimum amount by which the Face Amount can be increased or decreased is
based on Our rules then in effect.
Any unscheduled increase in the Face Amount will be deemed an increase in
the Supplemental Face Amount. All requests to increase the Face Amount must be
applied for on a new application and accompanied by the Policy. All requests
will be subject to evidence of insurability satisfactory to Us. Any increase
approved by Us will be effective on the date shown on the new Policy
specifications page, provided that the deduction for the Cost of Insurance for
the first month is made.
Each unscheduled increase in Face Amount is subject to an increase fee of
$.05 per $1,000 of each increase per month for the first five Policy Years from
the date of each increase.
A decrease in the Face Amount will be effective on the Monthly Activity Date
following the date We receive the request. The remaining Face Amount must not be
less than Our minimum rules then in effect. Decreases will be applied first to
the Supplemental Face Amount and then to the Basic Face Amount.
We reserve the right to limit the number of increases or decreases made
under the Policy to no more than one in any 12 month period.
- ---------------------------------------------------
BENEFITS AT MATURITY
If either Insured is living on the Maturity Date, on surrender of the Policy
to Hartford, Hartford will pay to the Policy Owner the Cash Surrender Value. On
the Maturity Date, the Policy will terminate and Hartford will have no further
obligations under the Policy.
- ---------------------------------------------------
LAPSE AND REINSTATEMENT
POLICY LAPSE AND GRACE PERIOD
The Policy will be in default on any Monthly Activity Date on which the Cash
Surrender Value is not sufficient to cover the Monthly Deduction Amount. A
61-day period, called the "grace period," will begin from the date of default.
Hartford will mail the Policy Owner and any assignee written notice of the
amount of premium that will be required to continue the Policy in force at least
30 days before the end of the grace period. The premiums required will be no
greater than the amount required to pay three Monthly Deduction Amounts as of
the day the grace period began. Unless the Death Benefit Guarantee is in effect,
the Policy will terminate without value if the required premium is not paid by
the end of the grace period. If the Death Benefit guarantee is in effect and
sufficient premium has not been paid by the end of the grace period, the Death
Benefit will be reduced to the Basic Face Amount and any riders will no longer
be in force. If the last surviving Insured dies during the grace period, We will
pay the Death Proceeds.
DEATH BENEFIT GUARANTEE DEFAULT AND GRACE PERIOD
If the cumulative premiums, less withdrawals, are not sufficient to maintain
the Death Benefit guarantee in effect, the lapse and grace period provisions for
the Death Benefit guarantee will apply as follows:
On every Monthly Activity Date during the Death Benefit guarantee period, We
will compare the cumulative premiums received, less withdrawals, to the
Cumulative Death Benefit Guarantee Premium for the Death Benefit guarantee
period in effect.
If the cumulative premiums received, less withdrawals, are less than the
Cumulative Death Benefit Guarantee Premium, the Death Benefit guarantee will be
deemed to be in default as of that Monthly Activity Date. A grace period of 61
days from the date of default will begin. We will mail the Policy Owner and any
assignee written notice of the amount of premium required to continue the Death
Benefit guarantee.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 15
- --------------------------------------------------------------------------------
At the end of the grace period under a ten-year guarantee period, the Death
Benefit guarantee will be removed from the Policy if We have not received the
amount of the required premium. You will receive a written notification of the
change.
At the end of the grace period under the last survivor life expectancy
guarantee period, the Death Benefit guarantee will be removed from the Policy if
We have not received the amount of the required premium, subject to the
following exception: If the Policy is in the first ten Policy Years and the
cumulative premiums received, less withdrawals, equal or exceed the Cumulative
Death Benefit Guarantee Premium for the ten-year period, We will change the
Death Benefit guarantee period to ten years. In this case, We will send You
notification of:
(a) the ten-year period measured from the Policy Date; and
(b) the Annual Death Benefit Guarantee Premium for that ten-year period.
REINSTATEMENT
Unless the Policy has been surrendered, the Policy may be reinstated prior
to the Maturity Date, provided:
(a) the Insureds alive at the end of the grace period are also alive on the date
of reinstatement;
(b) You make Your request within five years;
(c) satisfactory evidence of insurability is submitted;
(d) any Policy Indebtedness is repaid or reinstated; and
(e) You pay sufficient premium to (1) cover all Monthly Deduction Amounts that
are due and unpaid during the Grace Period and (2) keep the Policy in force
for three months after the date of reinstatement.
The Account Value on the reinstatement date will reflect:
(a) The Account Value at the time of termination; plus
(b) Net Premiums derived from premiums paid at the time of reinstatement.
Upon reinstatement, any Indebtedness at the time of termination must be
repaid or carried over to the reinstated Policy.
- ---------------------------------------------------
THE RIGHT TO EXAMINE OR EXCHANGE THE POLICY
An applicant has a limited right to return a Policy for cancellation. If the
Policy is returned, by mail or personal delivery to Hartford or to the agent who
sold the Policy, to be canceled within ten days after delivery of the Policy to
the Policy Owner, within ten days of Hartford's mailing or personal delivery of
a Notice of Right to Withdraw, or within 45 days of completion of the Policy
application (whichever is later, and subject to applicable state regulation),
Hartford will return to the applicant, within seven days thereafter, the greater
of the premium paid, less any Indebtedness, or the sum of (1) the Account Value,
less any Indebtedness, on the date the returned Policy is received by Hartford
or its agent and (2) any deductions under the Policy or by the Funds for taxes,
charges or fees.
Once the Policy is in effect, it may be exchanged during the first 24 months
after its issuance, for a non-variable last survivor life insurance policy
offered by Us or an affiliate on the life of the Insureds. No evidence of
insurability will be required. The new policy will have an amount at risk which
equals or is less than the amount at risk in effect on the date of exchange.
Premiums under the new policy will be based on the same risk classifications as
this Policy. An exchange of the Policy under these circumstances should be a
tax-free transaction under Section 1035 of the Code.
- ---------------------------------------------------
SURRENDER
At any time prior to the Maturity Date, provided the Policy has a Cash
Surrender Value, You may surrender the Policy to Us. We will pay You the Cash
Surrender Value. Our liability under the Policy will cease as of the date of
Your request.
- ---------------------------------------------------
VALUATION OF PAYMENTS AND TRANSFERS
We value the Policy on every Valuation Day.
We will pay Death Proceeds, Cash Surrender Values, Partial Withdrawals, and
loan amounts allocable to the Sub-Accounts within seven days after We receive
all the information needed to process the payment, unless the New York Stock
Exchange is closed for other than a regular holiday or weekend, trading is
restricted by the SEC or the SEC declares that an emergency exists.
Hartford may defer payment of any amounts not allocable to the Sub-Accounts
for up to six months from the date on which We receive the request.
- ---------------------------------------------------
APPLICATION FOR A POLICY
Individuals wishing to purchase a Policy must submit an application to
Hartford. Within limits, an applicant may choose the initial Face Amount.
Policies generally will be issued only on the lives of Insureds between the ages
of 20 and 80 who supply evidence of insurability satisfactory to Hartford.
(Hartford may extend the age 80 limit to higher ages for the older Insured, in
which case certain age and risk classification restrictions on the younger
Insured will apply.) Acceptance is subject to Hartford's underwriting rules and
Hartford reserves the right to reject an application for any reason. No change
in the terms or conditions of a Policy will be made without the consent of the
Policy Owner.
<PAGE>
16 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
The Policy will be effective on the Policy Date only after Hartford has
received all outstanding delivery requirements and received the initial premium.
The Policy Date is the date used to determine all future cyclical transactions
on the Policy, e.g., Monthly Activity Date and Policy Years.
- ---------------------------------------------------
REDUCED CHARGES FOR ELIGIBLE GROUPS
Certain of the charges and deductions described below may be reduced for
Policies issued in connection with a specific plan in accordance with Our rules
in effect as of the date an application for a Policy is approved. To qualify for
such a reduction, a plan must satisfy certain criteria as to, for example, size
of the plan, expected number of participants and anticipated premium payment
from the plan. Generally, the sales contacts and effort, administrative costs
and mortality cost per Policy vary, based on such factors as the size of the
plan, the purposes for which Policies are purchased and certain characteristics
for the plan's members. The amount of reduction and the criteria for
qualification will reflect in the reduced sales effort and administrative costs
resulting from, and the different mortality experience expected as a result of,
sales to qualifying plans. We may modify from time to time on a uniform basis
both the amounts of reductions and the criteria for qualification. Reductions in
these charges will not be unfairly discriminatory against any person, including
the affected Policy Owners invested in Separate Account VL II.
- ---------------------------------------------------
DEDUCTIONS FROM THE PREMIUM
Before the allocation of the premium to the Account Value, a deduction as a
percentage of premium is made for the premium processing charge, premium tax and
federal tax charge and front-end sales load. The amount of each premium
allocated to the Account Value is Your Net Premium.
PREMIUM PROCESSING CHARGE
A 1.25% charge is deducted from each premium payment for premium collection
costs and premium and Policy processing costs.
PREMIUM TAX CHARGE AND FEDERAL TAX CHARGE
We deduct as a premium tax charge a percentage of each premium to cover
premium-based taxes assessed against Hartford by a state or other governmental
entity. This percentage will vary by locale, depending on the tax rates in
effect there, and is based on the actual tax imposed. The range is generally
between 0% and 4%.
We also deduct a 1.25% charge from each premium payment to cover the
estimated costs to Us of the federal income tax treatment of the Policies'
deferred acquisition costs under Section 848 of the Code. We have determined
that this charge is reasonable in relation to Our increased federal income tax
burden under the Code resulting from the receipt of premiums.
FRONT-END SALES LOAD
The front-end sales load is a charge deducted from each premium based on the
(1) amount of premium paid in relation to the Target Premium, (2) Policy Year in
which the premium is paid and (3) amount of the premium Attributable to the
Basic Face Amount and to the Supplemental Face Amount. See "Glossary of Special
Terms," page 5, for a discussion of "Target Premium."
The current and maximum front-end sales load for premiums Attributable to
the Basic Face Amount up to the Target Premium is 50% in the first Policy Year,
15% in Policy Years 2 through 5, 10% in Policy Years 6 through 10, and 2% in
Policy Years 11 through 20. After Policy Year 20, the current front-end sales
load is 0%, with a maximum of 2%.
The current and maximum front-end sales load for premiums Attributable to
the Basic Face Amount in excess of the Target Premium is 9% in Policy Year 1, 4%
in Policy Years 2 through 10 and 2% in Policy Years 11 through 20. After Policy
Year 20, the current front-end sales load is 0%, with a maximum of 2%.
The current and maximum front-end sales load for all premiums Attributable
to the Supplemental Face Amount is 4% in Policy Years 1 through 10 and 2% in
Policy Years 11 through 20. After Policy Year 20, the current front-end sales
load is 0%, with a maximum of 2%.
Front-end sales loads which cover expenses reduced for certain sales of the
Policies under circumstances which may result in savings of such sales and
distribution expenses.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 17
- --------------------------------------------------------------------------------
EXAMPLES OF FRONT-END SALES LOADS/IMPACT OF REFUND OF LOAD
An example of the actual front-end sales loads and the impact of the load
refund, if any (see " -- Premiums -- Load Refund," page 11), for a Policy is
shown below. This example uses the same specific information (i.e., Issue Age,
Face Amount, premium level, etc.) as the illustration on page 39 of this
Prospectus.
<TABLE>
<S> <C>
Death Benefit Option: Level
Face Amount: $1,000,000 Basic Face Amount
Issue Ages/Sex/Class: 65/Male/Preferred
65/Female/Preferred
Guideline Annual Premium: $36,042.00
Annual Planned Premium: $27,000.00
</TABLE>
IMPACT OF FRONT-END SALES LOAD/REFUND OF LOADS
<TABLE>
<CAPTION>
CUMULATIVE CUMULATIVE
POLICY CUMULATIVE FRONT-END NIN-REFUNDABLE AMOUNT OF REFUND
YEAR PREMIUM PAID SALES LOAD SALES LOAD UPON SURRENDER
- ---------- ------------- ------------ --------------- -----------------
<S> <C> <C> <C> <C>
1 $ 27,000.00 $ 12,771.00 $ 8,098.96 $ 4,672.04
2 54,000.00 16,602.30 12,548.31 4,053.99
</TABLE>
- ---------------------------------------------------
DEDUCTIONS AND CHARGES
FROM THE ACCOUNT VALUE
MONTHLY DEDUCTION AMOUNTS
On the Policy Date and on each subsequent Monthly Activity Date, Hartford
will deduct an amount (the "Monthly Deduction Amount") from the Account Value to
cover certain charges and expenses incurred in connection with a Policy. Each
Monthly Deduction Amount will be deducted on a Pro Rata Basis from the Fixed
Account and each of the Sub-Accounts. The Monthly Deduction Amount will vary
from month to month.
The Monthly Deduction Amount equals:
(a) the charge for the Cost of Insurance; plus
(b) the charges for additional benefits provided by rider, if any; plus
(c) the charges for "special" insurance class rating, if any; plus
(d) the monthly administrative fee and issue charge; plus
(e) the mortality and expense risk charge; plus
(f) any Face Amount increase fee.
(a) COST OF INSURANCE CHARGE
The charge for the Cost of Insurance is equal to:
(i) the Cost of Insurance rate per $1,000; multiplied by
(ii) the amount at risk; divided by
(iii) $1,000.
The amount at risk equals the Death Benefit less the Account Value on that date,
prior to assessing the Monthly Deduction Amount.
The Cost of Insurance charge is to cover Hartford's anticipated mortality costs.
For standard risks, the Cost of Insurance rate will not exceed those based on
the 1980 Commissioners' Standard Ordinary Mortality Smoker or Nonsmoker Table,
age last birthday. A table of guaranteed Cost of Insurance rates per $1,000 will
be included in each Policy; however, Hartford reserves the right to use rates
less than those shown in the table. Substandard risks will be charged a higher
Cost of Insurance rate that will not exceed rates based on a multiple of the
1980 Commissioners' Standard Ordinary Mortality Smoker or Nonsmoker Table, age
last birthday. The multiple will be based on the Insureds' risk classes.
Hartford will determine the Cost of Insurance rate at the start of each Policy
Year. Any changes in the Cost of Insurance rate will be made uniformly for all
Insureds of the same issue ages, sexes and risk classes and whose coverage has
been in force for the same length of time. No change in insurance class or cost
will occur on account of deterioration of the Insureds' health.
Because the Account Value and the Death Benefit under a Policy may vary from
month to month, the Cost of Insurance charge may also vary on each Monthly
Activity Date.
On each Monthly Activity Date during the last 25 Policy Years before the
Maturity Date, Hartford will apply a discount to the Cost of Insurance rate if
You qualify for this discount. The discount is 10% times the ratio of the Basic
Face Amount at issue to the Face Amount at issue as shown on the Policy's
specification page. To qualify for the discount, the Policy must have been in
force at least 15 Policy Years and the ratio of the then-current Account Value
to the then-current Death Benefit must at least equal the qualifying ratio
described below. The qualifying ratio is 0% with 25 Policy Years remaining until
the Maturity Date and increases by three percentage points thereafter. For
example, with ten Policy Years remaining until the Maturity Date the qualifying
ratio is 45%, and with one Policy Year
<PAGE>
18 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
remaining the qualifying ratio is 72%. This discount may not be available in all
states.
(b) RIDER CHARGE
If the Policy includes riders, a charge is made applicable to the riders
from the Account Value on each Monthly Activity Date.
The charge applicable to these riders is to compensate Hartford for
anticipated cost of providing these benefits and are specified on the
applicable rider.
The riders available are described under "Supplemental Benefits," page
25.
(c) SPECIAL CLASS CHARGE
A charge for a special insurance class rating of an Insured may be made
against the Account Value, if applicable. This charge is to compensate
Hartford for the additional mortality risk associated with individuals
in these classes.
(d) MONTHLY ADMINISTRATIVE FEE AND ISSUE CHARGE
Hartford will assess a current monthly administrative fee to compensate
Hartford for administrative costs in connection with the Policies. The
current monthly administrative fee is the sum of $7.50 per month, plus
$0.01 per month per $1000 of Face Amount at issue, paid in Policy Years
1 through 10. On a blended-rate basis, the charge is guaranteed never to
exceed for all Policy Years the sum of $10.00 per month plus $0.03 per
month per $1000 of Basic Face Amount at issue and $15.00 per month plus
$0.05 per month per $1000 of Supplemental Face Amount at issue. This
guaranteed charge is a blended rate based on the ratio of the initial
Basic Face Amount and the Supplemental Face Amount to the initial Face
Amount. For example, if the initial Basic Face Amount was $200,000 and
the initial Supplemental Face Amount was $50,000, then the ratio of
initial Basic Face Amount to initial Face Amount is .80 ($200,000
divided by $250,000) and the ratio of initial Supplemental Face Amount
to initial Face Amount is .20 ($50,000 divided by $250,000). The blended
guaranteed charge would be $11.00 per month (.80 times $10.00 plus .20
times $15.00) and $.034 per thousand of Face Amount (.80 times $.03 plus
.20 times $.05).
In addition, in the first five Policy Years, there is a monthly issue charge
to compensate Hartford for the up-front costs to underwrite and issue a Policy.
The issue charge is the sum of $20.00 per month for the first five Policy Years
plus $.05 per $1000 of Face Amount at Issue Date or unscheduled Supplemental
Face Amount increase per month for the first five years from the Issue Date or
increase.
The sum of the premium processing charges, the monthly administrative fee
and the issue charge will not exceed the cost Hartford incurs in providing
administrative services under the Policies.
(e) MORTALITY AND EXPENSE RISK CHARGE
A current charge is made for mortality and expense risks assumed by
Hartford. This charge is allocated to Hartford's General Account.
Hartford may profit from this charge. See also " -- Account Values,"
page 11.
The current mortality and expense risk charge for any Monthly Activity
Date is equal to:
(i) the current mortality and expense risk rate; multiplied by
(ii) the portion of the Account Value allocated to the Sub-Account on
the Monthly Activity Date prior to assessing the Monthly Deduction
Amount.
The current and guaranteed mortality and expense risk rate for the first
ten Policy Years is 0.80%. After the tenth Policy Year, the current and
maximum rate is 0.80% on the first $100,000 of Account Value as
determined just prior to the Monthly Deduction. On the remaining Account
Value, the current Rate is 0.25% and the maximum rate is 0.40% for
Account Value attributable to the Basic Face Amount and 0.50% for Account
Value attributable to the Supplemental Face Amount.
The mortality risk assumed is that the actual Cost of Insurance charges
specified in the Policy will be insufficient to meet actual claims. The
expense risk assumed is that expenses incurred in issuing and
administering the Policies will exceed the administrative charges set in
the Policy. Hartford may profit from the mortality and expense risk
charge and may use any profits for any proper purpose, including any
difference between the cost it incurs in distributing the Policies and
the proceeds of the front-end sales load.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 19
- --------------------------------------------------------------------------------
CHARGES AGAINST THE FUNDS
The investment advisers charge the Funds an investment management fee on a
daily basis as compensation for services. The following Table shows the fee
charged for each Fund available for investment by Policy Owners.
<TABLE>
<CAPTION>
ANNUAL INVESTMENT MANAGEMENT AS A
HARTFORD FUNDS PERCENTAGE OF AVERAGE DAILY NET ASSETS
- -------------------------------------------------------------------------- --------------------------------------------------------
<S> <C>
Hartford Capital Appreciation Fund, Inc.,
Hartford Advisers Fund, Inc.,
Hartford International Opportunities Fund, Inc.,
Hartford Dividend and Growth Fund, Inc.................................. .575% of the first $250 million of average net assets
.525% of the next $250 million of average net assets
.475% of the next $250 million of average net assets
.425% of any amount over $1.0 billion
Hartford Bond Fund, Inc., Hartford Stock Fund, Inc........................ .325% of the first $250 million of average net assets
.300% of the next $250 million of average net assets
.275% of the next $250 million of average net assets
.250% of any amount over $1.0 billion
Hartford Index Fund, Inc.................................................. .20% of average net asset value
Hartford Mortgage Securities Fund, Inc.,
HVA Money Market Fund, Inc.............................................. .25% of average net asset value
<CAPTION>
ANNUAL INVESTMENT MANAGEMENT AS A
PUTNAM FUNDS PERCENTAGE OF AVERAGE DAILY NET ASSETS
- -------------------------------------------------------------------------- --------------------------------------------------------
<S> <C>
Putnam VT Diversified Income Fund,
Putnam VT Global Asset Allocation Fund,
Putnam VT High Yield Fund,
Putnam VT New Opportunities Fund,
Putnam VT Utilities Growth and Income Fund,
Putnam VT Voyager Fund.................................................. .70% of the first $500 million of average net assets
.60% of the next $500 million of average net assets
.55% of the next $500 million of average net assets
.50% of the next $5 billion of average net assets
.475% of the next $5 billion of average net assets
.455% of the next $5 billion of average net assets
.44% of the next $5 billion of average net assets
.43% of any excess thereafter
Putnam VT Money Market Fund............................................... .45% of the first $500 million of average net assets
.35% of the next $500 million of average net assets
.30% of the next $500 million of average net assets
.25% of the next $5 billion of average net assets
.225% of the next $5 billion of average net assets
.205% of the next $5 billion of average net assets
.19% of the next $5 billion of average net assets
.18% of any excess thereafter
Putnam VT Growth and Income Fund and
Putnam VT U.S. Government and High
Quality Bond Fund....................................................... .65% of the first $500 million of average net assets
.55% of the next $500 million of average net assets
.50% of the next $500 million of average net assets
.45% of the next $5 billion of average net assets
.425% of the next $5 billion of average net assets
.405% of the next $5 billion of average net assets
.39% of the next $5 billion of average net assets
.38% of any excess thereafter
Putnam VT Global Growth Fund.............................................. .60% of average net assets
</TABLE>
<PAGE>
20 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL INVESTMENT MANAGEMENT AS A
FIDELITY VIP FUNDS PERCENTAGE OF AVERAGE DAILY NET ASSETS
- -------------------------------------------------------------------------- --------------------------------------------------------
VIP Equity-Income Portfolio............................................... .52%
<S> <C>
VIP Overseas Portfolio.................................................... .77%
VIP II Asset Manager Portfolio............................................ .72%
</TABLE>
TAXES
Currently, no charge is made to Separate Account VL II for federal, state
and local taxes that may be allocable to Separate Account VL II. A change in the
applicable federal, state or local tax laws which impose tax on Hartford and/or
Separate Account VL II may result in a charge against the Policy in the future.
Charges for other taxes, if any, allocable to Separate Account VL II may also be
made.
- ---------------------------------------------------
THE COMPANY
Hartford Life Insurance Company ("Hartford") is a stock life insurance
company engaged in the business of writing health and life insurance, both
individual and group, in all states of the United States and the District of
Columbia. Hartford was originally incorporated under the laws of Massachusetts
on June 5, 1902, and was subsequently redomiciled to Connecticut. Its offices
are located in Simsbury, Connecticut; however, its mailing address is P.O. Box
2999, Hartford, CT 06104-2999. Hartford is a subsidiary of Hartford Fire
Insurance Company, one of the largest multiple lines insurance carriers in the
United States. Hartford is ultimately owned by ITT Hartford Group, Inc., a
Delaware corporation. Subject to shareholder approval on May 2, 1997, the name
of ITT Hartford Group, Inc. will change to The Hartford Financial Services
Group, Inc.
Hartford is rated A+ (superior) by A.M. Best and Company, Inc., on the basis
of its financial soundness and operating performance. Hartford is rated AA by
Standard & Poor's and AA+ by Duff and Phelps, on the basis of its claims paying
ability. These ratings do not apply to the investment performance of the
Sub-Accounts. The ratings apply to Hartford's ability to meet its insurance
obligations, including those described in this Prospectus.
- ---------------------------------------------------
SEPARATE ACCOUNT VL II
- -------------------------------- GENERAL
Separate Account VL II is a separate account of Hartford established on
September 30, 1994 pursuant to the insurance laws of the State of Connecticut
and organized as a unit investment trust registered with the SEC under the
Investment Company Act of 1940. Separate Account VL II meets the definition of
"separate account" under federal securities law. Under Connecticut law, the
assets of Separate Account VL II are held exclusively for the benefit of Policy
Owners and persons entitled to payments under the Policies. The assets for
Separate Account VL II are not chargeable with liabilities arising out of any
other business which Hartford may conduct.
- ---------------------------------------------------
FUNDS
The assets of each Sub-Account of Separate Account VL II are invested
exclusively in one of the Funds. A Policy Owner may allocate premium payments
among the Sub-Accounts. Policy Owners should review the following brief
descriptions of the investment objectives of each of the Funds in connection
with that allocation. There is no assurance that any of the Funds will achieve
its stated objectives. Policy Owners are also advised to read the prospectus for
each of the Funds accompanying this Prospectus for more detailed information.
HARTFORD FUNDS
HARTFORD ADVISERS FUND, INC.
Seeks maximum long-term total rate of return consistent with prudent
investment risk by investing in common stock and other equity securities, bonds
and other debt securities and money market instruments.
HARTFORD BOND FUND, INC.
Seeks maximum current income consistent with preservation of capital by
investing primarily in fixed-income securities. Up to 20% of the total assets of
this Fund may be invested in debt securities rated in the highest category below
investment grade ("Ba" by Moody's Investor Services, Inc. or "BB" by Standard &
Poor's) or, if unrated, are determined to be of comparable quality by the Fund's
investment adviser. Securities rated below investment grade are commonly
referred to as "high yield-high risk securities" or "junk bonds." For more
information concerning the risks associated with investing in such securities,
please refer to the section entitled "Hartford Bond Fund, Inc. -- Investment
Policies" in the prospectus for the Hartford Funds accompanying this Prospectus.
HARTFORD CAPITAL APPRECIATION FUND, INC.
Seeks growth of capital by investing in securities selected solely on the
basis of potential for capital appreciation; income, if any, is an incidental
consideration.
HARTFORD DIVIDEND AND GROWTH FUND, INC.
Seeks a high level of current income consistent with growth of capital and
reasonable investment risk.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 21
- --------------------------------------------------------------------------------
HARTFORD INDEX FUND, INC.
Seeks to provide investment results which approximate the price and yield
performance of publicly-traded common stocks in the aggregate, as represented by
the Standard & Poor's 500 Composite Stock Price Index.*
HARTFORD INTERNATIONAL OPPORTUNITIES FUND, INC.
Seeks long-term total rate of return consistent with prudent investment risk
through investment primarily in equity securities issued by non-U.S. companies.
HARTFORD MORTGAGE SECURITIES FUND, INC.
Seeks maximum current income consistent with safety of principal and
maintenance of liquidity by investing primarily in mortgage-related securities,
including securities issued by the Government National Mortgage Association.
HARTFORD STOCK FUND, INC.
Seeks long-term capital growth primarily through capital appreciation, with
income a secondary consideration, by investing primarily in equity securities.
HVA MONEY MARKET FUND, INC.
Seeks maximum current income consistent with liquidity and preservation of
capital.
PUTNAM FUNDS
PUTNAM VT DIVERSIFIED INCOME FUND
Seeks high current income consistent with capital preservation by investing
in the following three sections of the fixed income securities markets: a U.S.
Government Sector, a High Yield Sector (which invests primarily in securities
commonly known as "junk bonds"), and an International Sector. See the special
considerations for investments in high-yield securities described in the Fund
prospectus.
PUTNAM VT GLOBAL ASSET ALLOCATION FUND
Seeks a high level of long-term total return consistent with preservation of
capital by investing in U.S. equities, international equities, U.S. fixed income
securities and international fixed income securities.
PUTNAM VT GLOBAL GROWTH FUND
Seeks capital appreciation through a globally diversified portfolio of
common stocks.
PUTNAM VT GROWTH AND INCOME FUND
Seeks capital growth and current income by investing primarily in common
stocks that offer potential for capital growth, current income, or both.
PUTNAM VT HIGH YIELD FUND
Seeks high current income and, when consistent with this objective, a
secondary objective of capital growth, by investing primarily in high-yielding,
lower-rated fixed income securities, constituting a portfolio which Putnam
Management believes does not involve undue risk to income or principal. See the
special considerations for investments in high-yield securities described in the
Fund prospectus.
PUTNAM VT MONEY MARKET FUND
Seeks as high a rate of current income as Putnam Management believes is
consistent with preservation of capital and maintenance of liquidity by
investing in high-quality money market instruments.
PUTNAM VT NEW OPPORTUNITIES FUND
Seeks long-term capital appreciation by investing principally in common
stocks of companies in sectors of the economy which Putnam Management believes
possess above-average long-term growth potential.
PUTNAM VT U.S. GOVERNMENT AND HIGH QUALITY
BOND FUND
Seeks current income consistent with preservation of capital by investing
primarily in U.S. Government securities and in other debt obligations rated at
least A by a nationally recognized securities rating agency such as Standard &
Poor's or Moody's Investor Services, Inc. or, if not rated, determined by Putnam
Management to be of comparable quality.
PUTNAM VT UTILITIES GROWTH AND INCOME FUND
Seeks capital growth and current income by concentrating its investments in
debt and equity securities issued by companies in the public utilities
industries.
PUTNAM VT VOYAGER FUND
Seeks capital appreciation by investing primarily in common stocks of
companies that Putnam Management believes have potential for capital
appreciation that is significantly greater than that of market averages.
FIDELITY VIP FUNDS
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Seeks reasonable income by investing primarily in income-producing equity
securities. In choosing these securities, the Portfolio will also consider the
potential for capital appreciation. The Portfolio's goal is to achieve a yield
which exceeds the composite yield on the securities comprising the Standard &
Poor's Daily Stock Price Index of 500 Common Stocks.
* "STANDARD & POOR'S-REGISTERED TRADEMARK-," "S&P-REGISTERED TRADEMARK-," "S&P
500-REGISTERED TRADEMARK-," "STANDARD & POOR'S 500," AND "500" ARE TRADEMARKS
OF THE MCGRAW-HILL COMPANIES, INC. AND HAVE BEEN LICENSED FOR USE BY HARTFORD
LIFE INSURANCE COMPANY. THE HARTFORD INDEX FUND, INC. ("INDEX FUND") IS NOT
SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S AND STANDARD &
POOR'S MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF INVESTING IN THE
INDEX FUND.
<PAGE>
22 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
In addition, the Portfolio may invest in high-yield, lower-rated securities
(commonly referred to as "junk bonds") which are subject to greater risk than
investments in higher-rated securities. For a further discussion of lower-rated
securities, see "Risks of Lower-Rated Debt Securities" in the Fidelity
prospectus for this Portfolio.
FIDELITY VIP OVERSEAS PORTFOLIO
Seeks long-term growth of capital primarily through investments in foreign
securities and provides a means for aggressive investors to diversify their own
portfolios by participating in companies and economies outside of the United
States.
In addition, the Portfolio may invest in high-yield, lower-rated securities
(commonly referred to as "junk bonds") which are subject to greater risk than
investments in higher-rated securities. For a further discussion of lower-rated
securities, see "Risks of Lower-Rated Debt Securities" in the Fidelity
prospectus for this Portfolio.
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Seeks high total return with reduced risk over the long-term by allocating
its assets among stocks, bonds and short-term fixed-income instruments.
In addition, the Portfolio may invest in high-yield, lower-rated securities
(commonly referred to as "junk bonds") which are subject to greater risk than
investments in higher-rated securities. For a further discussion of lower-rated
securities, see "Risks of Lower-Rated Debt Securities" in the Fidelity
prospectus for this Portfolio.
The Hartford Funds are organized as corporations under the laws of the State
of Maryland and are registered as diversified open-end management companies
under the Investment Company Act of 1940. The Putnam Funds are portfolios of the
Putnam Variable Trust, which is organized as a business trust under the laws of
Massachusetts and is an open-end series investment company under the Investment
Company Act of 1940. The Fidelity VIP Funds are a series of two diversified
open-end management investment companies, each with multiple portfolios and
organized as a Massachusetts business trust. The VIP Equity-Income Portfolio and
VIP Overseas Portfolio are portfolios of the Variable Insurance Products Fund.
The VIP II Asset Manager Portfolio is a portfolio of the Variable Insurance
Products Fund II.
Each Fund continually issues an unlimited number of full and fractional
shares of beneficial interest in the Fund. Such shares are offered to separate
accounts, including Separate Account VL II, established by Hartford or one of
its affiliated companies specifically to fund the Policies and other policies
issued by Hartford or its affiliates, as permitted by the Investment Company Act
of 1940.
It is conceivable that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Funds simultaneously. Although neither Hartford nor the Funds
currently foresee any such disadvantages either to variable life insurance
Policy Owners or to variable annuity Policy Owners, the Board of Directors for
the Hartford Funds, the Board of Trustees for the Putnam Funds and the Board of
Trustees for the Fidelity VIP Funds (collectively, the "Boards") intend to
monitor events in order to identify any material conflicts between such Policy
Owners and to determine what action, if any, should be taken in response
thereto. If the Boards were to conclude that separate funds should be
established for variable life and variable life insurance separate accounts,
Hartford will bear the attendant expenses.
All investment income of and other distributions to each Sub-Account arising
from the applicable Fund are reinvested in shares of that Fund at net asset
value. The income and both realized gains or losses on the assets of each
Sub-Account are therefore separate and are credited to or charged against the
Sub-Account without regard to income, gains or losses from any other Sub-Account
or from any other business of Hartford. Hartford will purchase shares in the
Funds in connection with premium payments allocated to the applicable
Sub-Account in accordance with Policy Owners' directions and will redeem shares
in the Funds to meet Policy obligations or make adjustments in reserves, if any.
The Funds are required to redeem Fund shares at net asset value and generally to
make payment within seven days.
Hartford reserves the right, subject to compliance with the law as then in
effect, to make additions to, deletions from or substitutions for Separate
Account VL II and its Sub-Accounts which fund the Policies. If shares of any of
the Funds should no longer be available for investment, or if, in the judgment
of Hartford's management, further investment in shares of any Fund should become
inappropriate in view of the purposes of the Policies, Hartford may substitute
shares of another Fund for shares already purchased, or to be purchased in the
future, under the Policies. No substitution of securities will take place
without notice to and consent of Policy Owners and without prior approval of the
SEC to the extent required by the Investment Company Act of 1940. Subject to
Policy Owner approval, if required, Hartford also reserves the right to end the
registration under the Investment Company Act of 1940 of Separate Account VL II
or any other separate accounts of which it is the depositor and which may fund
the Policies.
Each Fund is subject to certain investment restrictions which may not be
changed without the approval of a majority of the shareholders of the Fund. See
the prospectus for each of the Funds accompanying this Prospectus.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 23
- --------------------------------------------------------------------------------
- ---------------------------------------------------
INVESTMENT ADVISER
HARTFORD FUNDS
The investment adviser for each of the Hartford Funds is HL Investment
Advisors, Inc. ("HL Advisors"), Hartford Plaza, Hartford, CT 06115. HL Advisors
provides investment advice and, in general, supervises the management and
investment program of the Hartford Funds pursuant to an Investment Advisory
Agreement entered into with each of these Funds, for which HL Advisors receives
a fee.
HL Advisors has entered into an investment services agreement with HIMCO, an
affiliate of Hartford organized under Connecticut law, pursuant to which HIMCO
provides certain investment services to Hartford Bond Fund, Hartford Index Fund,
Hartford Mortgage Securities Fund and HVA Money Market Fund.
Wellington Management serves as the investment sub-adviser to Hartford
Advisers Fund, Hartford Capital Appreciation Fund, Hartford Dividend and Growth
Fund, Hartford International Opportunities Fund and Hartford Stock Fund.
Wellington Management is a professional investment counseling firm which
provides investment services to investment companies, other institutions and
individuals. Wellington Management is organized as a private Massachusetts
partnership and its predecessor organizations have provided investment advisory
services to investment companies since 1933 and to investment counseling clients
since 1960. See the prospectus for each of the Hartford Funds accompanying this
Prospectus for a more complete description of HL Advisors, HIMCO and Wellington
Management and their respective fees.
PUTNAM FUNDS
Putnam Management, One Post Office Square, Boston, MA 02109, serves as the
investment manager for the Putnam Funds. An affiliate, Putnam Advisory Company,
Inc., manages domestic and foreign institutional accounts and mutual funds.
Another affiliate, Putnam Fiduciary Trust Company, provides investment advice to
institutional clients under its banking and fiduciary policies. Putnam
Management and its affiliates are wholly-owned subsidiaries of Marsh & McLennan
Companies, Inc., a publicly owned holding company whose principal businesses are
international insurance brokerage and employee benefit consulting.
FIDELITY VIP FUNDS
The Fidelity VIP Funds are managed by Fidelity Management & Research Company
("Fidelity Management"), whose principal business address is 82 Devonshire
Street, Boston, Massachusetts. Fidelity Management is one of America's largest
investment management organizations. It is composed of a number of different
companies, which provide a variety of financial services and products. Fidelity
Management is the original Fidelity company, founded in 1946. It provides a
number of mutual funds and other clients with investment research and portfolio
management services. Various Fidelity companies perform certain activities
required to operate Variable Insurance Products Fund and Variable Insurance
Products Fund II.
- ---------------------------------------------------
THE FIXED ACCOUNT
THAT PORTION OF THE POLICY RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION. THE FOLLOWING DISCLOSURE ABOUT
THE FIXED ACCOUNT MAY BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF
THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURE.
Premium Payments and Account Values allocated to the Fixed Account become a
part of the general assets of Hartford. Hartford invests the assets of the
General Account in accordance with applicable law governing the investments of
insurance company general accounts.
The Fixed Account minimum credited rate is shown in the Contract. Currently,
Hartford guarantees that it will credit interest at a rate of not less than 4%
per year, compounded annually, to amounts allocated to the Fixed Account under
the Policies. Hartford may credit interest at a rate in excess of the Fixed
Account minimum credited rate; however, Hartford is not obligated to credit any
interest in excess of the Fixed Account minimum credited rate. There is no
specific formula for the determination of excess interest credits. Some of the
factors that Hartford may consider in determining whether to credit excess
interest to amounts allocated to the Fixed Account and the amount thereof, are
general economic trends, rates of return currently available and anticipated on
Hartford's investments, regulatory and tax requirements and competitive factors.
ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF THE
FIXED ACCOUNT MINIMUM CREDITED RATE WILL BE DETERMINED IN THE SOLE DISCRETION OF
HARTFORD. THE POLICY OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO FIXED
ACCOUNT ALLOCATIONS MAY NOT EXCEED THE FIXED ACCOUNT MINIMUM CREDITED RATE.
<PAGE>
24 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- ---------------------------------------------------
OTHER MATTERS
- -------------------------------- VOTING RIGHTS
In accordance with its view of presently applicable law, Hartford will vote
the shares of the Funds at regular and special meetings of the shareholders of
the Funds in accordance with instructions from Policy Owners (or the assignee of
the Policy, as the case may be) having a voting interest in Separate Account VL
II. The number of shares held in the Separate Account which are allocable to
each Policy Owner is determined by dividing the Policy Owner's interest in each
Sub-Account by the net asset value of the applicable shares of the Funds.
Hartford will vote shares for which no instructions have been given and shares
which are not allocable to Policy Owners (i.e., shares owned by Hartford) in the
same proportion as it votes shares for which it has received instructions. If
the Investment Company Act of 1940 or any rule promulgated thereunder should be
amended, however, or if Hartford's present interpretation should change and, as
a result, Hartford determines it is permitted to vote the shares of the Funds in
its own right, it may elect to do so.
The voting interests of the Policy Owner (or the assignee) in the Funds will
be determined as follows: Policy Owners may cast one vote for each full or
fractional Accumulation Unit owned under the Policy and allocated to a
Sub-Account the assets of which are invested in the particular Fund on the
record date for the shareholder meeting for that Fund. If, however, a Policy
Owner has taken a loan secured by the Policy, amounts transferred from the Sub-
Account(s) to the Loan Account(s) in connection with the loan (see "Detailed
Description of Policy Benefits and Provisions -- Policy Loans," page 12) will
not be considered in determining the voting interests of the Policy Owner.
Policy Owners should review the prospectuses for the Funds which accompany this
Prospectus to determine matters on which shareholders may vote.
Hartford may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to cause a change in the sub-classification or investment objective
of one or more of the Funds or to approve or disapprove an investment advisory
policy for the Funds. In addition, Hartford itself may disregard voting
instructions in favor of changes initiated by a Policy Owner in the investment
policy or the investment adviser of the Funds if Hartford reasonably disapproves
of such changes. A change would be disapproved only if the proposed change is
contrary to state law or prohibited by state regulatory authorities. In the
event Hartford does disregard voting instructions, a summary of that action and
the reasons for such action will be included in the next periodic report to
Policy Owners.
- ---------------------------------------------------
STATEMENTS TO POLICY OWNERS
We will send You a statement at least once each Policy Year, showing:
(a) the current Account Value, Cash Surrender Value and Face Amount;
(b) the premiums paid, Monthly Deduction Amounts and loans since the last
report;
(c) the amount of any Indebtedness;
(d) notifications required by the provisions of the Policy; and
(e) any other information required by the Insurance Department of the state
where the Policy was delivered.
- ---------------------------------------------------
LIMIT ON RIGHT TO CONTEST
Hartford may not contest the validity of the Policy after it has been in
effect during the lifetime of the Insureds for two years from the Issue Date. If
the Policy is reinstated, the two year period is measured from the date of
reinstatement. Any increase in the Supplemental Face Amount for which evidence
of insurability was obtained is contestable during the lifetime of the Insureds
for two years from its effective date. In addition, if either Insured commits
suicide in the two year period, or such period as specified in state law, the
benefit payable will be limited to the premiums paid less any Indebtedness and
partial withdrawals.
- ---------------------------------------------------
MISSTATEMENT AS TO AGE
If the age of an Insured is incorrectly stated, the amount of Death Benefit
will be appropriately adjusted as specified in the Policy.
- ---------------------------------------------------
PAYMENT OPTIONS
Proceeds under the Policies may be paid in a lump sum or may be applied to
one of Hartford's payment options. The minimum amount that may be placed under a
payment option is subject to the then current rules of Hartford. Once payments
under the Second Option, the Third Option or the Fourth Option commence, no
surrender of the Policy may be made for the purpose of receiving a lump sum
settlement in lieu of the life insurance payments. The following options are
available under the Policies.
FIRST OPTION -- Interest Income
Payments of interest at the rate We declare, but not less than 3 1/2% per
year, on the amount applied under this option.
SECOND OPTION -- Income of Fixed Amount
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 25
- --------------------------------------------------------------------------------
Equal payments of the amount chosen until the amount applied under this
option, with interest of not less than 3 1/2% per year, is exhausted. The final
payment will be for the balance remaining.
THIRD OPTION -- Payments for a Fixed Period
An amount payable monthly for the number of years selected, which may be
from one to 30 years.
FOURTH OPTION -- Life Income
LIFE ANNUITY -- an annuity payable monthly during the lifetime of the
annuitant and terminating with the last monthly payment due preceding the
death of the annuitant.
LIFE ANNUITY WITH 120 MONTHLY PAYMENTS CERTAIN -- an annuity providing
monthly income to the annuitant for a fixed period of 120 months and for as
long thereafter as the annuitant shall live.
The Tables in the Policy provide for guaranteed dollar amounts of monthly
payments for each $1,000 applied under the four payment options. Under the
Fourth Option, the amount of each payment will depend upon the age of the
Annuitant at the time the first payment is due. If any periodic payment due any
payee is less than $200, Hartford may make payments less often.
The Table for the Fourth Option is based on the 1983a Individual Annuity
Mortality Table set back one year and a net investment rate of 3.5% per annum.
The Tables for the First, Second and Third Options are based on a net investment
rate of 3.5% per annum. Hartford may, however, from time to time, at Our
discretion if mortality appears more favorable and interest rates justify, apply
other tables which will result in higher monthly payments for each $1,000
applied under one or more of the four payment options.
Hartford will make any other arrangements for income payments as may be
agreed on.
- ---------------------------------------------------
BENEFICIARY
The applicant names the beneficiary in the application for the Policy. The
Policy Owner may change the beneficiary (unless irrevocably named) during the
lifetime of the Insureds by request In Writing to Hartford. If no beneficiary is
living when the last surviving Insured dies, the Death Proceeds will be paid to
the Policy Owner if living; otherwise to the Policy Owner's estate.
- ---------------------------------------------------
ASSIGNMENT
The Policy may be assigned as collateral for a loan or other obligation.
Hartford is not responsible for any payment made or action taken before receipt
of written notice of such assignment. Proof of interest must be filed with any
claim under a collateral assignment.
- ---------------------------------------------------
DIVIDENDS
No dividends will be paid under the Policies.
- ---------------------------------------------------
SUPPLEMENTAL BENEFITS
The following supplemental benefits, which are subject to the restrictions
and limitations set forth therein, are among the options that may be included in
a Policy by rider.
- ---------------------------------------------------
LAST SURVIVOR EXCHANGE OPTION RIDER
We will exchange this Policy for two individual policies on the life of each
Insured, subject to the conditions stated in this rider.
- ---------------------------------------------------
ESTATE PROTECTION RIDER
We will pay a term insurance benefit upon receipt of due proof of the last
surviving Insured's death while this Policy and rider were in force, subject to
the conditions stated in this rider.
- ---------------------------------------------------
MATURITY DATE EXTENSION RIDER
We will extend the Maturity Date (the date on which the Policy will mature)
to the date of the death of the second Insured to die, regardless of the age of
either Insured. Certain Death Benefit and premium restrictions apply. See
"Federal Tax Considerations -- Income Taxation of Policy Benefits," page 28.
- ---------------------------------------------------
YEARLY RENEWABLE TERM LIFE INSURANCE RIDER
While this Policy and rider are in force, We will pay the term life
insurance amount upon receipt of due proof of death of the designated Insured,
subject to the conditions stated in this rider.
<PAGE>
26 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
OTHER BUSINESS PROFESSION,
VOCATION OR EMPLOYMENT
POSITION WITH HARTFORD, FOR PAST 5 YEARS;
NAME, AGE YEAR OF ELECTION OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- ----------------------------------------------------------
<S> <C> <C>
Wendell J. Bossen, 63 Vice President, 1992** President (1992-Present), International Corporate
Marketing Group, Inc.; Executive Vice President
(1984-1992), Mutual Benefit.
Gregory A. Boyko, 45 Vice President, 1995 Vice President & Controller (1995-Present), Hartford;
Chief Financial Officer (1994-1995), IMG American Life;
Senior Vice President (1992-1994), Connecticut Mutual
Life Insurance Company.
Peter W. Cummins, 60 Vice President, 1989 Vice President, Individual Annuity Operations
(1989-Present), Hartford.
Ann M. deRaismes, 46 Vice President, 1994 Vice President (1994-Present); Assistant Vice President
(1992-1994); Director of Human Resources (1991-1997),
Hartford.
Timothy M. Fitch, 44 Vice President, 1995 Actuary (1997-Present); Vice President (1995-Present);
Actuary, 1997 Assistant Vice President (1993-1995); Director
(1991-1993), Hartford.
Bruce D. Gardner, 46 Vice President, 1996 Vice President (1996-Present); General Counsel and
Director, 1994* Corporate Secretary (1991-1995), Hartford.
Joseph H. Gareau, 50 Executive Vice President & Senior Vice President & Chief Investment Officer
Chief Investment Officer, 1993 (1992-1993), Hartford; Senior Vice President and Chief
Director, 1993* Investment Officer (1992), Hartford Insurance Group.
J. Richard Garrett, 52 Vice President, 1993 Treasurer (1994-Present), Hartford; Treasurer (1977),
Treasurer, 1977 Hartford Insurance Group.
John P. Ginnetti, 51 Executive Vice President & Senior Vice President, (1988-1994), Hartford.
Director, Asset Management
Services, 1994
Director, 1988*
Lynda Godkin, 43 General Counsel, 1996 Associate General Counsel and Corporate Secretary
Corporate Secretary, 1995 (1995-1996); Assistant General Counsel and Secretary
(1994-1995); Counsel (1990-1994), Hartford.
Lois W. Grady, 52 Vice President, 1993 Assistant Vice President (1988-1993), Hartford.
David A. Hall, 43 Senior Vice President & Actuary, Senior Vice President & Actuary (1992-Present), Hartford.
1992
Robert A. Kerzner, 45 Vice President, 1994 Vice President (1994-Present); Regional Vice President
(1991-1994), Hartford.
Andrew W. Kohnke, 48 Vice President, 1992 Vice President (1992-Present); Assistant Vice President
(1989-1992), Hartford.
Steven M. Maher, 42 Vice President & Actuary, 1993 Vice President & Actuary (1993-Present); Assistant Vice
President (1987), Hartford.
William B. Malchodi, Jr., 46 Vice President, 1994 Vice President (1994-Present); Director of Taxes
Director of Taxes, 1992 (1992-1997), Hartford Insurance Group.
Thomas M. Marra, 38 Executive Vice President & Senior Vice President & Director, Individual Life and
Director, Individual Life and Annuity Division (1993-1996); Director of Individual
Annuity Division, 1996 Annuities (1991-1993), Hartford.
Director, 1994*
Robert F. Nolan, 42 Vice President, 1995 Assistant Vice President (1992-1995), Hartford; Manager
Public Relations (1986), Aetna Life and Casualty
Insurance Company.
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 27
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OTHER BUSINESS PROFESSION,
VOCATION OR EMPLOYMENT
POSITION WITH HARTFORD, FOR PAST 5 YEARS;
NAME, AGE YEAR OF ELECTION OTHER DIRECTORSHIPS
- -------------------------------- ------------------------------------- ----------------------------------------------------------
<S> <C> <C>
Joseph J. Noto, 45 Vice President, 1989 President, and Director (1994-Present), American Maturity
Life Insurance Company.
Leonard E. Odell, Jr., 52 Senior Vice President, 1994 Senior Vice President (1994-Present); Vice President and
Director, 1994* Chief Actuary (1982-1994), Hartford.
Craig D. Raymond, 36 Vice President, 1993 Assistant Vice President (1992-1993); Actuary (1989-1994),
Chief Actuary, 1994 Hartford.
Lowndes A. Smith, 57 President & Chief Operating President * Chief Operating Officer (1989-Present),
Officer, 1989 Hartford.
Director, 1981*
Edward J. Sweeney, 40 Vice President, 1993 Chicago Regional Manager (1985-1993), Hartford.
Raymond P. Welnicki, 48 Senior Vice President * Senior Vice President & Director, Employee Benefit
Director, Employee Benefit Division, (1994-Present) Vice President (1993-1994),
Division, 1994 Hartford; Board of Directors, Ethix Corp.
Director, 1994*
Walter C. Welsh, 50 Vice President, 1995 Assistant Vice President (1993-1995), Hartford.
James J. Westervelt, 50 Senior Vice President & Senior Vice President & Group Controller (1994-Present);
Group Controller, 1994 Vice President and Group Controller (1989-1994),
Hartford Insurance Group.
Lizabeth H. Zlatkus, 38 Vice President, 1994 Vice President (1994-Present); Assistant Vice President
Director, 1994* (1992-1994), Hartford.
</TABLE>
- ------------------------
* Denotes year of election to Board of Directors.
** ITT Hartford Affiliated Company
Unless otherwise indicated, the principal business address of each the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
- ---------------------------------------------------
DISTRIBUTION OF THE POLICIES
Hartford intends to sell the Policies in all jurisdictions where it is
licensed to do business. The Policies will be sold by life insurance sales
representatives who represent Hartford and who are registered representatives of
Hartford Equity Sales Company, Inc. ("HESCO"), 200 Hopmeadow Street, Simsbury,
Connecticut 06089, or certain other registered Broker-Dealers. Any sales
representative or employee will have been qualified to sell variable life
insurance policies under applicable federal and state laws. Each Broker-Dealer
is registered with the SEC under the Securities Exchange Act of 1934 and all are
members of the National Association of Securities Dealers, Inc. HESCO is the
principal underwriter for the Policies. During the first Policy Year, the
maximum sales commission payable to Hartford agents, independent registered
insurance brokers, and other registered Broker-Dealers is 45% of the premiums
paid up to a Target Premium and 5% of any excess. In Policy Years 2 through 10,
agent commissions will not exceed 5.5% of premiums paid. For Policy Years 11 and
later, the agent commissions will not exceed 2% of the premiums paid. Agent
commissions may be less for premiums attributable to Supplemental Face Amount.
In addition, expense allowances may be paid. The sales representative may be
required to return all or a portion of the commissions paid if the Policy
terminates prior to the second Policy Anniversary.
- ---------------------------------------------------
SAFEKEEPING OF SEPARATE
ACCOUNT VL II'S ASSETS
The assets of the Separate Account are held by Hartford. The assets of the
Separate Account are kept physically segregated and held separate and apart from
the General Account of Hartford. Hartford maintains records of all purchases and
redemptions of shares of the Funds. Additional protection for the assets of the
Separate Account is afforded by Hartford's blanket fidelity bond issued by Aetna
Casualty and Surety Company, in the aggregate amount of $50 million, covering
all of the officers and employees of Hartford.
<PAGE>
28 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- ---------------------------------------------------
FEDERAL TAX CONSIDERATIONS
- -------------------------------- GENERAL
SINCE THE TAX LAW IS COMPLEX AND SINCE TAX CONSEQUENCES WILL VARY ACCORDING
TO THE ACTUAL STATUS OF THE POLICY OWNER INVOLVED AND THE TYPE OF PLAN UNDER
WHICH THE POLICY IS PURCHASED, LEGAL AND TAX ADVICE MAY BE NEEDED BY A PERSON,
TRUSTEE OR OTHER ENTITY CONTEMPLATING THE PURCHASE OF A POLICY DESCRIBED HEREIN.
It should be understood that any detailed description of the federal income
tax consequences regarding the purchase of these Policies cannot be made in this
Prospectus and that special tax rules may be applicable with respect to certain
purchase situations not discussed herein. In addition, no attempt is made here
to consider any applicable state or other tax laws. For detailed information, a
qualified tax adviser should always be consulted. This discussion of federal tax
considerations is based upon Hartford's understanding of existing federal income
tax laws as they are currently interpreted.
- ---------------------------------------------------
TAXATION OF HARTFORD AND
THE SEPARATE ACCOUNT
The Separate Account is taxed as a part of Hartford which is taxed as a life
insurance company under Subchapter L of the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under Subchapter M of the Code. Investment income
and realized capital gains on the assets of the Separate Account (the underlying
Funds) are reinvested and are taken into account in determining the value of the
Accumulation Units. As a result, such investment income and realized capital
gains are automatically applied to increase reserves under the Policy. (See
"Detailed Description of Policy Benefits and Provisions -- Premiums --
Accumulation Unit Values," page 10).
Hartford does not expect to incur any federal income tax on the earnings or
realized capital gains attributable to the Separate Account. Based upon this
expectation, no charge is currently being made to the Separate Account for
federal income taxes. If Hartford incurs income taxes attributable to the
Separate Account or determines that such taxes will be incurred, it may assess a
charge for such taxes against the Separate Account.
- ---------------------------------------------------
INCOME TAXATION OF POLICY BENEFITS
For federal income tax purposes, the Policies should be treated as life
insurance policies under Section 7702 of the Code. The death benefit under a
life insurance policy is generally excluded from the gross income of the
beneficiary. Also, a life insurance policy owner is generally not taxed on
increments in the policy value until the policy is partially or completely
surrendered. Section 7702 limits the amount of premiums that may be invested in
a policy that is treated as life insurance. Hartford intends to monitor premium
levels to assure compliance with the Section 7702 requirements.
Although Hartford believes that the Last Survivor Policies are in compliance
with Section 7702 of the Code, the manner in which Section 7702 should be
applied to certain features of a joint survivorship life insurance contract is
not directly addressed by Section 7702. In the absence of final regulations or
other guidance issued under Section 7702, there is necessarily some uncertainty
whether a last survivor life insurance Policy will meet the Section 7702
definition of a life insurance contract.
Hartford also believes that any loan received under a Policy will be treated
as Indebtedness of the Policy Owner, and that no part of any loan under a Policy
will constitute income to the Policy Owner. A surrender or assignment of the
Policy may have tax consequences, depending upon the circumstances. Policy
Owners should consult a qualified tax adviser concerning the effect of such
changes.
During the first 15 Policy Years, an "income first" rule generally applies
to distributions of cash required to be made under Code Section 7702 because of
a reduction in benefits under the Policy.
The Last Survivor Exchange Option Rider permits, under limited
circumstances, a Policy to be split into two individual policies on the life of
each of the Insureds. A Policy split may have adverse tax consequences. It is
not clear whether a Policy split will be treated as a nontaxable exchange or
transfer under the Code. Unless a Policy split is so treated, among other
things, the split or transfer will result in the recognition of taxable income
on the gain in the Policy. In addition, it is not clear whether, in all
circumstances, the individual policies that result from a Policy split would be
treated as life insurance policies under Section 7702 of the Code or would be
classified as modified endowment contracts. The Policy Owner should consult a
qualified tax adviser regarding the possible adverse tax consequences of a
Policy split.
The Maturity Date Extension Rider allows a Policy Owner to extend the
Maturity Date to the date of the death of the last surviving insured. If the
Maturity Date of the Policy is extended by rider, Hartford believes the Policy
will continue to be treated as a life insurance contract for
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 29
- --------------------------------------------------------------------------------
federal income tax purposes after the scheduled Maturity Date. However, due to
the lack of specific guidance on this issue, the result is not certain. If the
Policy is not treated as a life insurance contract for federal income tax
purposes after the scheduled Maturity Date, among other things, the Death
Proceeds may be taxable to the recipient. The Policy Owner should consult a
qualified tax adviser regarding the possible adverse tax consequences resulting
from an extension of the scheduled Maturity Date.
- ---------------------------------------------------
MODIFIED ENDOWMENT CONTRACTS
Code Section 7702A applies an additional test, the "seven-pay" test, to life
insurance contracts. The seven-pay test provides that premiums cannot be paid at
a rate more rapidly than that allowed by the payment of seven annual premiums
using specified computational rules described in Section 7702A(c). A modified
endowment contract ("MEC") is a life insurance policy that either: (i) satisfies
the Section 7702 definition of life insurance, but fails the seven-pay test of
Section 7702A or (ii) is exchanged for a MEC.
If the Policy satisfies the seven-pay test at issuance, distributions and
loans made thereafter will not be subject to the MEC rules, unless the Policy is
changed materially. The seven-pay test will be applied anew at any time the
Policy undergoes a material change, which includes an increase in the Face
Amount. In addition, if there is a reduction in benefits under the Policy within
the first seven years, the seven-pay test is applied as if the Policy had
initially been issued at the reduced benefit level. Any reduction in benefits
attributable to the nonpayment of premiums will not be taken into account for
purposes of the seven-pay test if the benefits are reinstated within 90 days
after the reduction.
A policy that is classified as a MEC is eligible for certain aspects of the
beneficial tax treatment accorded to life insurance. That is, the death benefit
is excluded from income and increments in value are not subject to current
taxation. However, if the contract is classified as a MEC then withdrawals from
the contract will be considered first as withdrawals of income and then as a
recovery of premium payments. Thus, withdrawals will be includible in income to
the extent the contract value exceeds the investment in the contract. The amount
of any loan (including unpaid interest thereon) under the contract will be
treated as a withdrawal from the contract for tax purposes. In addition, if the
policy owner assigns or pledges any portion of the value of a contract (or
agrees to assign or pledge any portion), then such portion will be treated as a
withdrawal from the contract for tax purposes. Taxable withdrawals are subject
to an additional 10% tax, with certain exceptions. The policy owner's investment
in the contract is increased by the amount includible in income with respect to
such assignment, pledge, or loan, though it is not affected by any other aspect
of the assignment, pledge, or loan (including its release or repayment).
Generally, only distributions and loans made in the first year in which a
policy becomes a MEC, and in subsequent years, are taxable. However,
distributions and loans made in the two years prior to a policy's failing the
seven-pay test are deemed to be in anticipation of failure and are subject to
tax.
Before assigning, pledging, or requesting a loan under a contract that is a
MEC, a policy owner should consult a qualified tax adviser.
All MEC policies that are issued within any calendar year to the same policy
owner by one company or its affiliates are treated as one MEC policy for the
purpose of determining the taxable portion of any loan or distribution.
Hartford has instituted procedures to monitor whether a Policy may become
classified as a MEC after issue.
- ---------------------------------------------------
ESTATE AND GENERATION SKIPPING TAXES
When the last surviving Insured dies, the Death Proceeds will generally be
includible in the Policy Owner's estate for purposes of federal estate tax if
the last surviving Insured owned the Policy. If the Policy Owner was not the
last surviving Insured, the fair market value of the Policy would be included in
the Policy Owner's estate upon the Policy Owner's death. The Policy would not be
includible in the last surviving Insured's estate if he or she neither retained
incidents of ownership at death nor had given up ownership within three years
before death.
Federal estate tax is integrated with federal gift tax under a unified rate
schedule. In general, estates less than $600,000 will not incur a federal estate
tax liability. In addition, an unlimited marital deduction may be available for
federal estate and gift tax purposes. The unlimited marital deduction permits
the deferral of taxes until the death of the surviving spouse.
If the Policy Owner (whether or not he or she is an Insured) transfers
ownership of the Policy to someone two or more generations younger, the transfer
may be subject to the generation skipping transfer tax, the taxable amount being
the value of the Policy. The generation-skipping transfer tax provisions
generally apply to transfers which would be subject to the gift and estate tax
rules. Individuals are generally allowed an aggregate generation skipping
transfer exemption of $1 million. Because these rules are complex, the Policy
Owner should consult with a qualified tax adviser for specific information if
ownership is passing to younger generations.
- ---------------------------------------------------
DIVERSIFICATION REQUIREMENTS
Section 817 of the Code provides that a variable life insurance contract
(other than a pension plan policy) will not be treated as a life insurance
contract for any period
<PAGE>
30 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
during which the investments made by the separate account or underlying fund are
not adequately diversified in accordance with regulations prescribed by the
Treasury Department. If a Policy is not treated as a life insurance contract,
the Policy Owner will be subject to income tax on the annual increases in cash
value.
The Treasury Department has issued diversification regulations which
generally require, among other things, that no more than 55% of the value of the
total assets of the segregated asset account underlying a variable contract is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. In determining whether the
diversification standards are met, all securities of the same issuer, all
interests in the same real property project, and all interests in the same
commodity are each treated as a single investment. In addition, in the case of
government securities, each government agency or instrumentality shall be
treated as a separate issuer.
A separate account must be in compliance with the diversification standards
on the last day of each calendar quarter or within 30 days after the quarter
ends. If an insurance company inadvertently fails to meet the diversification
requirements, the company may comply within a reasonable period and avoid the
taxation of policy income on an ongoing basis. However, either the company or
the Policy Owner must agree to pay the tax due for the period during which the
diversification requirements were not met.
Hartford monitors the diversification of investments in its separate
accounts, including Separate Account VL II, and tests for diversification as
required by the Code. Hartford intends to administer all contracts subject to
the diversification requirements in a manner that will maintain adequate
diversification.
- ---------------------------------------------------
OWNERSHIP OF THE ASSETS IN
THE SEPARATE ACCOUNT
In order for a variable life insurance contract to qualify for tax deferral,
assets in the segregated asset accounts supporting the variable contract must be
considered to be owned by the insurance company and not by the variable contract
owner. The Internal Revenue Service ("IRS") has issued several rulings which
discuss investor control. The IRS has ruled that incidents of ownership by the
contract owner, such as the ability to select and control investments in a
separate account, will cause the contract owner to be treated as the owner of
the assets for tax purposes.
Further, in the explanation to the temporary Section 817 diversification
regulations, the Treasury Department noted that the temporary regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the owner of the assets in the
account." The explanation further indicates that "the temporary regulations
provide that in appropriate cases a segregated asset account may include
multiple sub-accounts, but do not specify the extent to which policyholders may
direct their investments to particular sub-accounts without being treated as the
owners of the underlying assets. Guidance on this and other issues will be
provided in regulations or revenue rulings under section 817(d), relating to the
definition of variable contract." The final regulations issued under Section 817
did not provide guidance regarding investor control, and as of the date of this
Prospectus, no other such guidance has been issued. Further, Hartford does not
know if or in what form such guidance will be issued. In addition, although
regulations are generally issued with prospective effect, it is possible that
regulations may be issued with retroactive effect. Due to the lack of specific
guidance regarding the issue of investor control, there is necessarily some
uncertainty regarding whether a Policy Owner could be considered the owner of
the assets for tax purposes. Hartford reserves the right to modify the Policies,
as necessary, to prevent Policy Owners from being considered the owners of the
assets in the separate accounts.
- ---------------------------------------------------
LIFE INSURANCE PURCHASED FOR USE IN
SPLIT DOLLAR ARRANGEMENTS
On January 26, 1996, the IRS released a technical advice memorandum ("TAM")
on the taxability of life insurance policies used in certain split dollar
arrangements. A TAM, issued by the National Office of the IRS, provides advice
as to the internal revenue laws, regulations, and related statutes with respect
to a specific set of facts and a specific taxpayer. In the TAM, among other
things, the IRS concluded that an employee was subject to current taxation on
the excess of the cash surrender value of the policy over the premiums to be
returned to the employer. Purchasers of life insurance policies to be used in
split dollar arrangements are strongly advised to consult with a qualified tax
adviser to determine the tax treatment resulting from such an arrangement.
- ---------------------------------------------------
FEDERAL INCOME TAX WITHHOLDING
If any amounts are deemed to be current taxable income to the Policy Owner,
such amounts will be subject to federal income tax withholding and reporting,
pursuant to the Code.
- ---------------------------------------------------
NON-INDIVIDUAL OWNERSHIP OF POLICIES
Legislation has recently been proposed which would limit certain of the tax
advantages now afforded non-individual owners of life insurance contracts.
Prospective Policy Owners which are not individuals should consult a qualified
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 31
- --------------------------------------------------------------------------------
tax adviser to determine the status of this proposed legislation and its
potential impact on the purchaser.
- ---------------------------------------------------
OTHER
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership, or receipt of Policy proceeds depend on the
circumstances of each Policy Owner or beneficiary. A qualified tax adviser
should be consulted to determine the impact of these taxes.
- ---------------------------------------------------
LIFE INSURANCE PURCHASES BY NONRESIDENT
ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal
income tax consequences to life insurance purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally be
subject to U.S. federal income tax and withholding on taxable distributions from
life insurance policies at a 30% rate, unless a lower treaty rate applies. In
addition, purchasers may be subject to state and/or municipal taxes and taxes
that may be imposed by the purchaser's country of citizenship or residence.
Prospective purchasers are advised to consult with a qualified tax adviser
regarding U.S., state and foreign taxation with respect to a life insurance
policy purchase.
- ---------------------------------------------------
LEGAL PROCEEDINGS
There are no pending material legal proceedings to which the Separate
Account is a party.
- ---------------------------------------------------
LEGAL MATTERS
Legal matters in connection with the issue and sale of the last survivor
flexible premium variable life insurance policies described in this Prospectus
and the organization of Hartford, its authority to issue the Policies under
Connecticut law and the validity of the forms of the Policies under Connecticut
law and legal matters relating to the federal securities and income tax laws
have been passed on by Lynda Godkin, General Counsel of Hartford Life Insurance
Companies.
- ---------------------------------------------------
EXPERTS
The audited consolidated financial statements and financial statement
schedules included in this Prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports. Reference is made to said report on the consolidated financial
statements of Hartford Life Insurance Company (the Depositor), which includes an
explanatory paragraph with respect to the change in method of accounting for
debt and equity securities as of January 1, 1994, as discussed in Note 2 of
Notes to Consolidated Financial Statements. The principal business address of
Arthur Andersen LLP is One Financial Plaza, Hartford, CT 06103.
The hypothetical Policy illustrations have been approved by Ken A. McCullum,
FSA, MAAA, Director of Individual Life Product Development, and are included in
this Prospectus in reliance upon his opinion as to their reasonableness.
- ---------------------------------------------------
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities
Act of 1933, as amended. This Prospectus does not contain all information set
forth in the registration statement, its amendments and exhibits, to all of
which reference is made for further information concerning Separate Account VL
II, Hartford, and the Policies.
<PAGE>
32 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
APPENDIX A
ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES
AND CASH SURRENDER VALUES
The tables in Appendix A illustrate the way in which a Policy operates. They
show how the Death Benefit and surrender value could vary over an extended
period of time assuming hypothetical gross rates of return equal to constant
after tax annual rates of 0%, 6% and 12%. The illustrations assume the
following: a male, preferred, age 55, and a female, preferred, age 50, with
$1,000,000 of Basic Face Amount and a premium of $15,500.00 paid in all years; a
male, preferred, age 55, and a female, preferred, age 50, with $750,000 of Basic
Face Amount and $250,000 of Supplemental Face Amount and a premium of $7,500.00
paid in all years; a male, preferred, age 65, and a female, preferred, age 65,
with $1,000,000 of Basic Face Amount and a premium of $27,000.00 paid in all
years; and a male, preferred, age 65, and a female, preferred, age 65 with
$750,000 of Basic Face Amount and $250,000 of Supplemental Face Amount and a
premium of $21,500.00 paid in all years.
The Death Benefit and surrender value for a Policy would be different from
those shown if the rates of return averaged 0%, 6% and 12% over a period of
years, but also fluctuated above or below those averages for individual Policy
Years. They would also differ if any contract loan were made during the period
of time illustrated.
The tables reflect the deductions of current Policy charges and guaranteed
Policy charges for a single gross interest rate. The Death Benefits and
surrender values would change if the current Cost of Insurance charges change.
The amounts shown for the Death Benefit and surrender value as of the end of
each Policy Year take into account an average daily charge equal to an annual
charge of 0.70% of the average daily net assets of the Funds for investment
advisory and administrative services fees. The gross annual investment return
rates of 0%, 6% and 12% on the Fund's assets are equal to net annual investment
return rates (net of the 0.70% average daily charge) of -.70%, 5.30% and 11.30%,
respectively.
In addition, the death benefit and surrender value as of the end of each
Policy Year take into account the front-end sales load, premium processing
charge, federal tax charge, premium tax charge (assumed to be 2.0% in these
illustrations), Cost of Insurance charge, monthly administrative fee, issue
charge, and mortality and expense risk charge.
The hypothetical returns shown in the tables are without any tax charges
that may be allocable to the Separate Account in the future. In order to produce
after tax returns of 0%, 6%, and 12%, the Separate Account would have to earn a
sufficient amount in excess of 0% or 6% or 12% to cover any tax charges (see
"Detailed Description of Policy Benefits and Provisions -- Deductions and
Charges From the Account Value -- Taxes," page 20).
The "Premium Paid Plus Interest" column of each table shows the amount which
would accumulate if the initial premium was invested to earn interest, after
taxes of 5% per year, compounded annually.
Hartford will furnish upon request, a comparable illustration reflecting the
proposed insureds age, risk classification, Face Amount or initial premium
requested, and reflecting guaranteed Cost of Insurance rates. Hartford will also
furnish an additional similar illustration reflecting current Cost of Insurance
rates which may be less than, but never greater than, the guaranteed Cost of
Insurance rates.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 BASIC FACE AMOUNT
ISSUE AGE 55 MALE PREFERRED
ISSUE AGE 50 FEMALE PREFERRED
$15,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED ---------------------------- --------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- -------------- -------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1 16,275 6,640 1,000,000 6,355 1,000,000
2 33,364 19,876 1,000,000 19,276 1,000,000
3 51,307 34,386 1,000,000 33,438 1,000,000
4 70,147 50,280 1,000,000 48,948 1,000,000
5 89,930 67,680 1,000,000 65,923 1,000,000
6 110,701 88,459 1,000,000 86,232 1,000,000
7 132,511 111,199 1,000,000 108,453 1,000,000
8 155,412 136,078 1,000,000 132,757 1,000,000
9 179,457 163,290 1,000,000 159,332 1,000,000
10 204,705 193,046 1,00,0000 188,382 1,000,000
11 231,215 229,559 1,000,000 221,973 1,000,000
12 259,051 270,036 1,000,000 258,855 1,000,000
13 288,279 314,910 1,000,000 299,348 1,000,000
14 318,968 364,656 1,000,000 343,816 1,000,000
15 351,191 419,812 1,000,000 392,680 1,000,000
16 385,026 480,980 1,000,000 446,431 1,000,000
17 420,552 548,784 1,035,877 505,661 1,000,000
18 457,855 623,886 1,140,111 570,998 1,043,461
19 497,022 707,036 1,251,892 642,465 1,137,562
20 538,148 799,101 1,372,056 720,352 1,236,845
25 724,270 1,424,338 2,126,664 1,221,573 1,823,918
30 1,014,302 2,435,429 3,251,826 1,951,085 2,605,123
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $9,740.00 IN YEAR ONE AND $23,557.74 IN YEAR TWO FOR THE
CURRENT CHARGES.
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
34 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 BASIC FACE AMOUNT
ISSUE AGE 55 MALE PREFERRED/
ISSUE AGE 50 FEMALE PREFERRED
$15,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED -------------------------- --------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- -------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1 16,275 6,255*** 1,000,000 5,978 1,000,000
2 33,364 18,372*** 1,000,000 17,806 1,000,000
3 51,307 30,928 1,000,000 30,060 1,000,000
4 70,147 43,921 1,000,000 42,738 1,000,000
5 89,930 57,346 1,000,000 55,832 1,000,000
6 110,701 72,865 1,000,000 71,006 1,000,000
7 132,511 88,870 1,000,000 86,650 1,000,000
8 155,412 105,353 1,000,000 102,754 1,000,000
9 179,457 122,298 1,000,000 119,302 1,000,000
10 204,705 139,682 1,000,000 136,269 1,000,000
11 231,215 161,092 1,000,000 155,138 1,000,000
12 259,051 183,507 1,000,000 174,499 1,000,000
13 288,279 206,971 1,00,0000 194,304 1,000,000
14 318,968 231,513 1,000,000 214,486 1,000,000
15 351,191 257,177 1,000,000 234,972 1,000,000
16 385,026 284,001 1,000,000 255,679 1,000,000
17 420,552 311,968 1,000,000 276,521 1,000,000
18 457,855 341,156 1,000,000 297,403 1,000,000
19 497,022 371,651 1,000,000 318,228 1,000,000
20 538,148 403,540 1,000,000 338,875 1,000,000
25 724,270 583,303 1,000,000 433,159 1,000,000
30 1,014,302 804,440 1,074,102 486,347 1,000,000
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $9,355.00 IN YEAR ONE AND $22,053.74 IN YEAR TWO FOR THE
CURRENT CHARGES.
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 BASIC FACE AMOUNT
ISSUE AGE 55 MALE PREFERRED/
ISSUE AGE 50 FEMALE PREFERRED
$15,500 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.70% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED -------------------------- --------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- -------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1 16,275 5,870*** 1,000,000 5,602 1,000,000
2 33,364 16,915*** 1,000,000 16,383 1,000,000
3 51,307 27,697 1,000,000 26,905 1,000,000
4 70,147 38,198 1,000,000 37,149 1,000,000
5 89,930 48,396 1,000,000 47,095 1,000,000
6 110,701 59,867 1,000,000 58,315 1,000,000
7 132,511 70,960 1,000,000 69,163 1,000,000
8 155,412 81,648 1,000,000 79,607 1,000,000
9 179,457 91,897 1,000,000 89,615 1,000,000
10 204,705 101,661 1,000,000 99,141 1,000,000
11 231,215 114,217 1,000,000 109,403 1,000,000
12 259,051 126,576 1,000,000 119,089 1,000,000
13 288,279 138,728 1,000,000 128,113 1,000,000
14 318,968 150,646 1,000,000 136,367 1,000,000
15 351,191 162,318 1,000,000 143,735 1,000,000
16 385,026 173,717 1,000,000 150,081 1,000,000
17 420,552 184,749 1,000,000 155,258 1,000,000
18 457,855 195,427 1,000,000 159,102 1,000,000
19 497,022 205,760 1,000,000 161,426 1,000,000
20 538,148 215,757 1,000,000 162,006 1,000,000
25 724,270 254,025 1,000,000 126,058 1,000,000
30 1,014,302 261,033 1,000,000 -- 1,000,000
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $8,970.00 IN YEAR ONE AND $20,596.74 IN YEAR TWO FOR THE
CURRENT CHARGES.
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
36 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$750,000 BASIC FACE AMOUNT
$250,000 SUPPLEMENTAL FACE AMOUNT
ISSUE AGE 55 MALE PREFERRED/
ISSUE AGE 50 FEMALE PREFERRED
$7,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED --------------------------- --------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- -------------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1 7,875 3,573*** 1,000,000 3,209 1,000,000
2 16,144 9,606*** 1,000,000 8,839 1,000,000
3 24,826 16,159 1,000,000 14,948 1,000,000
4 33,942 23,263 1,000,000 21,561 1,000,000
5 43,514 30,948 1,000,000 28,703 1,000,000
6 53,565 40,441 1,000,000 37,596 1,000,000
7 64,118 50,696 1,000,000 47,187 1,000,000
8 75,199 61,757 1,000,000 57,513 1,000,000
9 86,834 73,665 1,000,000 68,608 1,000,000
10 99,051 86,455 1,000,000 80,495 1,000,000
11 111,878 102,890 1,000,000 93,739 1,000,000
12 125,347 121,037 1,000,000 107,884 1,000,000
13 139,490 141,092 1,000,000 122,975 1,000,000
14 154,339 163,237 1,000,000 139,008 1,000,000
15 169,931 187,692 1,000,000 155,974 1,000,000
16 186,303 214,688 1,000,000 173,851 1,000,000
17 203,493 244,419 1,000,000 192,620 1,000,000
18 221,543 277,214 1,000,000 212,251 1,000,000
19 240,495 313,440 1,000,000 232,717 1,000,000
20 260,394 353,506 1,000,000 253,970 1,000,000
25 350,453 623,999 1,000,000 368,547 1,000,000
30 490,791 1,068,158 1,426,222 482,460 1,000,000
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $4,210.50 IN YEAR ONE AND $9,606.00 IN YEAR TWO FOR THE
CURRENT CHARGES.
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$750,000 BASIC FACE AMOUNT
$250,000 SUPPLEMENTAL FACE AMOUNT
ISSUE AGE 55 MALE PREFERRED/
ISSUE AGE 50 FEMALE PREFERRED
$7,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED -------------------------- --------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- -------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1 7,875 3,353*** 1,000,000 3,000 1,000,000
2 16,144 8,828*** 1,000,000 8,105 1,000,000
3 24,826 14,443 1,000,000 13,334 1,000,000
4 33,942 20,181 1,000,000 18,669 1,000,000
5 43,514 26,019 1,000,000 24,084 1,000,000
6 53,565 33,084 1,000,000 30,709 1,000,000
7 64,118 40,242 1,000,000 37,405 1,000,000
8 75,199 47,458 1,000,000 44,137 1,000,000
9 86,834 54,690 1,000,000 50,862 1,000,000
10 99,051 61,881 1,000,000 57,520 1,000,000
11 111,878 71,654 1,000,000 64,553 1,000,000
12 125,347 81,778 1,000,000 71,387 1,000,000
13 139,490 92,254 1,000,000 77,907 1,000,000
14 154,339 103,074 1,000,000 83,972 1,000,000
15 169,931 114,290 1,000,000 89,420 1,000,000
16 186,303 125,893 1,000,000 94,061 1,000,000
17 203,493 137,796 1,000,000 97,682 1,000,000
18 221,543 150,025 1,000,000 100,045 1,000,000
19 240,495 162,605 1,000,000 100,864 1,000,000
20 260,394 175,563 1,000,000 99,788 1,000,000
25 350,453 238,152 1,000,000 46,648 1,000,000
30 490,791 283,875 1,000,000 -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $3,990.50 IN YEAR ONE AND $8,828.00 IN YEAR TWO FOR THE
CURRENT CHARGES.
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
38 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$750,000 BASIC FACE AMOUNT
$250,000 SUPPLEMENTAL FACE AMOUNT
ISSUE AGE 55 MALE PREFERRED/
ISSUE AGE 50 FEMALE PREFERRED
$7,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.70% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED ------------------------- --------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- -------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1 7,875 3,133*** 1,000,000 2,791 1,000,000
2 16,144 8,078*** 1,000,000 7,398 1,000,000
3 24,826 12,848 1,000,000 11,835 1,000,000
4 33,942 17,422 1,000,000 16,082 1,000,000
5 43,514 21,776 1,000,000 20,113 1,000,000
6 53,565 26,993 1,000,000 25,011 1,000,000
7 64,118 31,913 1,000,000 29,616 1,000,000
8 75,199 36,502 1,000,000 33,894 1,000,000
9 86,834 40,719 1,000,000 37,803 1,000,000
10 99,051 44,509 1,000,000 41,288 1,000,000
11 111,878 50,444 1,000,000 44,770 1,000,000
12 125,347 56,205 1,000,000 47,681 1,000,000
13 139,490 61,778 1,000,000 49,921 1,000,000
14 154,339 67,136 1,000,000 51,365 1,000,000
15 169,931 72,260 1,000,000 51,873 1,000,000
16 186,303 77,119 1,000,000 51,281 1,000,000
17 203,493 81,608 1,000,000 49,414 1,000,000
18 221,543 85,734 1,000,000 46,065 1,000,000
19 240,495 89,507 1,000,000 41,005 1,000,000
20 260,394 92,931 1,000,000 33,954 1,000,000
25 350,453 95,700 1,000,000 -- --
30 490,791 55,227 1,000,000 -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $3,770.50 IN YEAR ONE AND $8,078.00 IN YEAR TWO FOR THE
CURRENT CHARGES.
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 39
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 BASIC FACE AMOUNT
ISSUE AGE 65 MALE PREFERRED/
ISSUE AGE 65 FEMALE PREFERRED
$27,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED ---------------------------- --------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- -------------- -------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1 28,350 12,929*** 1,000,000 12,643 1,000,000
2 58,118 36,326*** 1,000,000 35,725 1,000,000
3 89,373 61,279 1,000,000 60,329 1,000,000
4 122,192 87,821 1,000,000 86,483 1,000,000
5 156,652 115,976 1,000,000 114,207 1,000,000
6 192,834 148,056 1,000,000 145,804 1,000,000
7 230,826 181,978 1,000,000 179,186 1,000,000
8 270,717 225,670 1,000,000 214,301 1,000,000
9 312,603 273,714 1,000,000 251,078 1,000,000
10 356,583 326,531 1,000,000 289,476 1,000,000
11 402,762 388,547 1,000,000 332,772 1,000,000
12 451,251 457,159 1,000,000 378,477 1,000,000
13 502,163 533,085 1,000,000 427,000 1,000,000
14 555,621 617,128 1,000,000 478,929 1,000,000
15 611,752 710,397 1,000,000 535,056 1,000,000
16 670,690 813,544 1,094,278 596,446 1,000,000
17 732,574 926,834 1,220,014 664,590 1,000,000
18 797,553 1,051,293 1,356,091 741,634 1,000,000
19 865,781 1,188,074 1,503,895 829,591 1,050,118
20 937,420 1,338,460 1,664,945 924,255 1,149,704
25 1,261,632 2,336,059 2,710,973 1,504,229 1,745,643
30 1,766,849 3,916,137 4,291,618 2,332,386 2,556,016
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $17,601.04 IN YEAR ONE AND $40,379.99 IN YEAR TWO FOR
THE CURRENT CHARGES.
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
40 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 BASIC FACE AMOUNT
ISSUE AGE 65 MALE PREFERRED/
ISSUE AGE 65 FEMALE PREFERRED
$27,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED ---------------------------- --------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- -------------- -------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1 28,350 12,197*** 1,000,000 11,920 1,000,000
2 58,118 33,549*** 1,000,000 32,983 1,000,000
3 89,373 54,992 1,000,000 54,123 1,000,000
4 122,192 76,395 1,000,000 75,206 1,000,000
5 156,652 97,597 1,000,000 96,074 1,000,000
6 192,834 120,602 1,000,000 118,723 1,000,000
7 230,826 143,053 1,000,000 140,797 1,000,000
8 270,717 172,784 1,000,000 161,952 1,000,000
9 312,603 203,617 1,000,000 181,771 1,000,000
10 356,583 235,548 1,000,000 199,788 1,000,000
11 402,762 271,759 1,000,000 218,186 1,000,000
12 451,251 309,412 1,000,000 234,026 1,000,000
13 502,163 348,475 1,000,000 246,774 1,000,000
14 555,621 388,842 1,000,000 255,798 1,000,000
15 611,752 430,594 1,000,000 260,268 1,000,000
16 670,690 473,134 1,000,000 259,047 1,000,000
17 732,574 516,297 1,000,000 250,589 1,000,000
18 797,553 560,462 1,000,000 232,792 1,000,000
19 865,781 606,045 1,000,000 202,903 1,000,000
20 937,420 653,511 1,000,000 157,330 1,000,000
25 1,261,632 930,954 1,080,363 -- --
30 1,766,849 1,273,986 1,396,136 -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $16,869.04 IN YEAR ONE AND $37,602.99 IN YEAR TWO FOR
THE CURRENT CHARGES.
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 BASIC FACE AMOUNT
ISSUE AGE 65 MALE PREFERRED/
ISSUE AGE 65 FEMALE PREFERRED
$27,000 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.70% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED -------------------------- --------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- -------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1 28,350 11,466*** 1,000,000 11,198 1,000,000
2 58,118 30,861*** 1,000,000 30,329 1,000,000
3 89,373 49,126 1,000,000 48,333 1,000,000
4 122,192 66,137 1,000,000 65,084 1,000,000
5 156,652 81,744 1,000,000 80,434 1,000,000
6 192,834 97,856 1,000,000 96,289 1,000,000
7 230,826 112,101 1,000,000 110,276 1,000,000
8 270,717 132,396 1,000,000 122,059 1,000,000
9 312,603 152,149 1,000,000 131,221 1,000,000
10 356,583 171,303 1,000,000 137,295 1,000,000
11 402,762 192,429 1,000,000 142,036 1,000,000
12 451,251 212,893 1,000,000 142,668 1,000,000
13 502,163 232,548 1,000,000 138,587 1,000,000
14 555,621 251,140 1,000,000 129,061 1,000,000
15 611,752 268,599 1,000,000 113,113 1,000,000
16 670,690 283,955 1,000,000 89,401 1,000,000
17 732,574 296,658 1,000,000 56,140 1,000,000
18 797,553 306,796 1,000,000 10,933 1,000,000
19 865,781 314,429 1,000,000 -- --
20 937,420 319,587 1,000,000 -- --
25 1,261,632 262,720 1,000,000 -- --
30 1,766,849 -- -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $16,138.04 IN YEAR ONE AND $34,914.99 IN YEAR TWO FOR
THE CURRENT CHARGES.
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
42 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$750,000 BASIC FACE AMOUNT
$250,000 SUPPLEMENTAL FACE AMOUNT
ISSUE AGE 65 MALE PREFERRED/
ISSUE AGE 65 FEMALE PREFERRED
$21,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED ---------------------------- --------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- -------------- -------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1 22,575 12,091*** 1,000,000 11,727 1,000,000
2 46,279 30,919*** 1,000,000 30,151 1,000,000
3 71,168 50,812 1,000,000 49,598 1,000,000
4 97,301 71,737 1,000,000 70,028 1,000,000
5 124,741 93,643 1,000,000 91,383 1,000,000
6 153,553 118,222 1,000,000 115,345 1,000,000
7 183,806 143,737 1,000,000 140,170 1,000,000
8 215,571 178,412 1,000,000 165,644 1,000,000
9 248,925 216,474 1,000,000 191,489 1,000,000
10 283,946 258,229 1,000,000 217,393 1,000,000
11 320,718 306,799 1,000,000 245,176 1,000,000
12 359,329 360,386 1,000,000 272,793 1,000,000
13 399,871 419,485 1,000,000 300,025 1,000,000
14 442,439 484,607 1,000,000 326,642 1,000,000
15 487,136 556,543 1,000,000 352,340 1,000,000
16 534,068 635,594 1,000,000 376,689 1,000,000
17 583,346 722,891 1,000,000 399,100 1,000,000
18 635,089 819,948 1,057,673 418,793 1,000,000
19 689,418 926,790 1,173,156 434,828 1,000,000
20 746,464 1,044,229 1,298,943 446,094 1,000,000
25 1,004,633 1,822,499 2,114,992 357,400 1,000,000
30 1,406,935 3,053,019 3,345,743 -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $13,918.50 IN YEAR ONE AND $30,919.00 IN YEAR TWO FOR
THE CURRENT CHARGES.
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$750,000 BASIC FACE AMOUNT
$250,000 SUPPLEMENTAL FACE AMOUNT
ISSUE AGE 65 MALE PREFERRED/
ISSUE AGE 65 FEMALE PREFERRED
$21,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.30% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED ------------------------ --------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- -------------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1 22,575 11,405*** 1,000,000 11,051 1,000,000
2 46,279 28,481*** 1,000,000 27,757 1,000,000
3 71,168 45,444 1,000,000 44,333 1,000,000
4 97,301 62,141 1,000,000 60,623 1,000,000
5 124,741 78,388 1,000,000 76,441 1,000,000
6 153,553 95,659 1,000,000 93,259 1,000,000
7 183,806 112,024 1,000,000 109,141 1,000,000
8 215,571 135,613 1,000,000 123,685 1,000,000
9 248,925 160,011 1,000,000 136,391 1,000,000
10 283,946 185,193 1,000,000 146,686 1,000,000
11 320,718 213,309 1,000,000 155,665 1,000,000
12 359,329 242,397 1,000,000 161,056 1,000,000
13 399,871 272,371 1,000,000 162,087 1,000,000
14 442,439 303,046 1,000,000 157,820 1,000,000
15 487,136 334,429 1,000,000 147,022 1,000,000
16 534,068 365,527 1,000,000 128,010 1,000,000
17 583,346 396,044 1,000,000 98,492 1,000,000
18 635,089 426,189 1,000,000 55,384 1,000,000
19 689,418 456,183 1,000,000 -- --
20 746,464 486,258 1,000,000 -- --
25 1,004,633 628,972 1,000,000 -- --
30 1,406,935 781,318 1,000,000 -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $13,232.50 IN YEAR ONE AND $28,481.00 IN YEAR TWO FOR
THE CURRENT CHARGES.
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
44 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$750,000 BASIC FACE AMOUNT
$250,000 SUPPLEMENTAL FACE AMOUNT
ISSUE AGE 65 MALE PREFERRED/
ISSUE AGE 65 FEMALE PREFERRED
$21,500 SCHEDULED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.70% NET)
<TABLE>
<CAPTION>
PREMIUMS CURRENT CHARGES* GUARANTEED CHARGES**
END OF ACCUMULATED -------------------------- ------------------------
POLICY AT 5% INTEREST ACCOUNT DEATH ACCOUNT DEATH
YEAR PER YEAR VALUE BENEFIT VALUE BENEFIT
------- -------------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1 22,575 10,719*** 1,000,000 10,377 1,000,000
2 46,279 26,126*** 1,000,000 25,446 1,000,000
3 71,168 40,451 1,000,000 39,437 1,000,000
4 97,301 53,558 1,000,000 52,213 1,000,000
5 124,741 65,286 1,000,000 63,612 1,000,000
6 153,553 77,062 1,000,000 75,059 1,000,000
7 183,806 86,959 1,000,000 84,627 1,000,000
8 215,571 103,147 1,000,000 91,949 1,000,000
9 248,925 118,841 1,000,000 96,569 1,000,000
10 283,946 133,976 1,000,000 97,966 1,000,000
11 320,718 150,242 1,000,000 97,002 1,000,000
12 359,329 165,851 1,000,000 91,627 1,000,000
13 399,871 180,638 1,000,000 81,146 1,000,000
14 442,439 194,317 1,000,000 64,731 1,000,000
15 487,136 206,797 1,000,000 41,283 1,000,000
16 534,068 216,795 1,000,000 9,279 1,000,000
17 583,346 223,785 1,000,000 -- --
18 635,089 226,911 1,000,000 -- --
19 689,418 226,650 1,000,000 -- --
20 746,464 223,137 1,000,000 -- --
25 1,004,633 113,345 1,000,000 -- --
30 1,406,935 -- -- -- --
</TABLE>
<TABLE>
<C> <S>
* THESE VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
** THESE VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES, ADMINISTRATIVE FEES, AND MORTALITY AND EXPENSE RISK RATES.
*** IF YOU SURRENDER YOUR POLICY DURING THE FIRST TWO POLICY YEARS, YOU WILL
RECEIVE A REFUND IN ADDITION TO THE CASH VALUES SHOWN. THE REFUND PLUS THE
CASH VALUE WOULD BE $12,546.50 IN YEAR ONE AND $26,126.00 IN YEAR TWO FOR
THE CURRENT CHARGES.
THE DEATH BENEFIT MAY, AND THE ACCOUNT VALUES AND CASH SURRENDER VALUES WILL
DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 45
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Hartford Life
Insurance Company (a Connecticut corporation and wholly-owned subsidiary of
Hartford Life and Accident Insurance Company) and subsidiaries as of December
31, 1996 and 1995, and the related consolidated statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1996. These consolidated financial statements and the
schedules referred to below are the responsibility of Hartford Life Insurance
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Hartford Life Insurance Company and subsidiaries as of December 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
As discussed in Note 2 of Notes to Consolidated Financial Statements, Hartford
Life Insurance Company adopted a new accounting standard promulgated by the
Financial Accounting Standards Board, changing its method of accounting, as of
January 1, 1994, for debt and equity securities.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in the
Index to Consolidated Financial Statements and Schedules are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not a required part of the basic consolidated financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic consolidated financial statements and, in our opinion, fairly state
in all material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 10, 1997
<PAGE>
46 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other considerations............... $1,705 $1,487 $1,100
Net investment income........................... 1,397 1,328 1,292
Net realized capital (losses) gains............. (213) (11) 7
------ ------ ------
Total Revenues................................ 2,889 2,804 2,399
------ ------ ------
Benefits, Claims and Expenses
Benefits, claims and claim adjustment
expenses....................................... 1,535 1,422 1,405
Amortization of deferred policy acquisition
costs.......................................... 234 199 145
Dividends to policyholders...................... 635 675 419
Other insurance expenses........................ 427 317 227
------ ------ ------
Total Benefits, Claims and Expenses........... 2,831 2,613 2,196
------ ------ ------
Income before income tax expense................ 58 191 203
Income tax expense.............................. 20 62 65
------ ------ ------
Net income........................................ $ 38 $ 129 $ 138
------ ------ ------
------ ------ ------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of the above statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER
31,
-----------------
1996 1995
------- -------
<S> <C> <C>
(IN MILLIONS
EXCEPT SHARE
DATA)
Assets
Investments
Fixed maturities, available for sale, at fair
value (amortized cost $13,579 and $14,440)..... $13,624 $14,400
Equity securities, available for sale, at fair
value.......................................... 119 63
Policy loans, at outstanding balance............ 3,836 3,381
Mortgage loans, at outstanding balance.......... 2 265
Other investments, at cost...................... 54 156
------- -------
Total investments............................. 17,635 18,265
Cash............................................ 43 46
Premiums and amounts receivable................. 137 165
Accrued investment income....................... 407 394
Reinsurance recoverable......................... 6,066 6,221
Deferred policy acquisition costs............... 2,760 2,188
Deferred income tax............................. 474 420
Other assets.................................... 357 234
Separate account assets......................... 49,690 36,264
------- -------
Total assets.................................. $77,569 $64,197
------- -------
------- -------
Liabilities
Future policy benefits.......................... $ 2,281 $ 2,373
Other policyholder funds........................ 22,134 22,598
Other liabilities............................... 1,572 1,233
Separate account liabilities.................... 49,690 36,264
------- -------
Total liabilities............................. 75,677 62,468
------- -------
Stockholder's Equity
Common stock, $5,690 par value, 1,000 shares
authorized, issued and outstanding............. 6 6
Capital surplus................................. 1,045 1,007
Net unrealized capital gain (loss) on
investments, net of tax........................ 30 (57)
Retained earnings............................... 811 773
------- -------
Total stockholder's equity.................... 1,892 1,729
------- -------
Total liabilities and stockholder's equity...... $77,569 $64,197
------- -------
------- -------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of the above statements.
<PAGE>
48 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
NET UNREALIZED
CAPITAL GAIN
(LOSS) ON TOTAL
COMMON CAPITAL INVESTMENTS, RETAINED STOCKHOLDER'S
STOCK SURPLUS NET OF TAX EARNINGS EQUITY
------ -------------- -------------- -------- -------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Balance, December 31, 1993.............. $6 $ 676 $ (5) $516 $1,193
Net income............................ -- -- -- 138 138
Dividends declared on common stock.... -- -- -- (10) (10)
Capital contribution.................. -- 150 -- -- 150
Change in net unrealized capital loss
on investments, net of tax(1)........ -- -- (649) -- (649)
--
------ ------ -------- ------
Balance, December 31, 1994.............. 6 826 (654) 644 822
Net income............................ -- -- -- 129 129
Capital contribution.................. -- 181 -- -- 181
Change in net unrealized capital gain
on investments, net of tax........... -- -- 597 -- 597
--
------ ------ -------- ------
Balance, December 31, 1995.............. 6 1,007 (57) 773 1,729
Net income............................ -- -- -- 38 38
Capital contribution.................. -- 38 -- -- 38
Change in net unrealized capital gain
on investments, net of tax........... -- -- 87 -- 87
--
------ ------ -------- ------
Balance, December 31, 1996.............. $6 $1,045 $ 30 $811 $1,892
--
--
------ ------ -------- ------
------ ------ -------- ------
</TABLE>
- ------------------------
(1) The 1994 change in net unrealized capital loss on investments, net of tax,
includes a gain of $91 due to the adoption of SFAS No. 115 as discussed in
Note 2(b) of Notes to Consolidated Financial Statements.
The accompanying notes to consolidated financial statements are an integral part
of the above statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 49
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
(IN MILLIONS)
Operating Activities
Net income............................ $ 38 $ 129 $ 138
Adjustments to net income:
Net realized capital losses (gains) on
sale of investments.................. 213 11 (7)
Net amortization of premium on fixed
maturities........................... 14 21 41
Increase in deferred income taxes..... (102) (172) (128)
Increase in deferred policy
acquisition costs.................... (572) (379) (441)
Decrease (increase) in premiums and
amounts receivable................... 10 (81) 10
Increase in accrued investment
income............................... (13) (16) (106)
(Increase) decrease in other assets... (132) (177) 101
Decrease (increase) in reinsurance
recoverable.......................... 179 (35) 75
(Decrease) increase in liability for
future policy benefits............... (92) 483 224
Increase in other liabilities......... 477 281 191
-------- -------- --------
Cash provided by operating
activities......................... 20 65 98
-------- -------- --------
Investing Activities
Purchases of fixed maturity
investments.......................... (5,747) (6,228) (9,127)
Sales of fixed maturity investments... 3,459 4,845 5,713
Maturities and principal paydowns of
fixed maturity investments........... 2,693 1,741 1,931
Net purchase of other investments..... (107) (871) (1,338)
Net sales (purchases) of short-term
investments.......................... 84 (24) 135
-------- -------- --------
Cash provided by (used for)
investing activities............... 382 (537) (2,686)
-------- -------- --------
Financing Activities
Capital contribution.................. 38 -- 150
Dividends paid........................ -- -- (10)
Net (disbursements for) receipts from
investment and universal life-type
contracts (charged from) credited to
policyholder accounts................ (443) 498 2,467
-------- -------- --------
Cash (used for) provided by
financing activities............... (405) 498 2,607
-------- -------- --------
Net (decrease) increase in cash....... (3) 26 19
Cash--beginning of year............... 46 20 1
-------- -------- --------
Cash--end of year....................... $ 43 $ 46 $ 20
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of the above statements.
<PAGE>
50 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(IN MILLIONS)
- ---------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
These consolidated financial statements include Hartford Life Insurance
Company and its wholly-owned subsidiaries (the "Company"), ITT Hartford Life and
Annuity Insurance Company ("ILA") and ITT Hartford International Life
Reassurance Corporation ("HLRe"), formerly American Skandia Life Reinsurance
Corporation. The Company is a wholly-owned subsidiary of Hartford Life and
Accident Insurance Company ("HLA"), a wholly-owned subsidiary of Hartford Life,
Inc. ("Hartford Life"), a direct subsidiary of Hartford Accident and Indemnity
Company, an indirect subsidiary of ITT Hartford Group, Inc. ("The Hartford").
Hartford Life was formed on December 13, 1996 and capitalized on December 16,
1996 with the contribution of all the outstanding common stock of HLA. On
February 10, 1997, The Hartford, the ultimate parent of Hartford Life, announced
its intention to sell up to 20% of Hartford Life during the second quarter of
1997. Management believes that this transaction will not have a material impact
on the operations of the Company (See Note 11).
On December 19, 1995, ITT Industries, Inc. (formerly ITT Corporation)("ITT")
distributed all the outstanding shares of capital stock of The Hartford to ITT
stockholders of record on such date (the transactions relating to such
distribution are referred to herein as the "ITT Spin-off"). As a result of the
ITT Spin-off, The Hartford became an independent, publicly traded company.
The Company is a leading insurance and financial services company which
provides: (a) investment products such as individual variable annuities and
fixed market value adjusted annuities, deferred compensation plan services and
mutual funds for savings and retirement needs; (b) life insurance for income
protection and estate planning; and (c) employee benefits products such as
corporate owned life insurance.
- ---------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These financial statements present the financial position, results of
operations and cash flows of the Company, and all material intercompany
transactions and balances between Hartford Life Insurance Company and its
subsidiaries have been eliminated. The consolidated financial statements are
prepared on a basis of generally accepted accounting principles which differ
materially from the statutory accounting prescribed by various insurance
regulatory authorities.
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(B) CHANGES IN ACCOUNTING PRINCIPLES
On November 14, 1996, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 96-12, "Recognition of Interest Income and Balance Sheet
Classification of Structured Notes". This Issue requires companies to record
income on certain structured securities on a retrospective interest method. The
Company adopted EITF No. 96-12 for structured securities acquired after November
14, 1996. Adoption of EITF No. 96-12 did not have a material effect on the
Company's financial condition or results of operations.
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities".
This statement established criteria for determining whether transferred assets
should be accounted for as sales or secured borrowings. Subsequently, in
December 1996, the FASB issued SFAS No. 127, "Deferral of Effective Date of
Certain Provisions of FASB Statement No. 125", which defers the effective date
of certain provisions of SFAS No. 125 for one year. Adoption of SFAS No. 125 is
not expected to have a material effect on the Company's financial condition or
results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", which is effective in 1996. As permitted by SFAS No. 123, the
Company continues to measure compensation costs of employee stock option plans
(relating to options on common stock of The Hartford) using the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25. As of February
10, 1997, the Company had not adopted an employee stock compensation plan.
Certain officers of the Company participate in The Hartford's stock option plan.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 51
- --------------------------------------------------------------------------------
Compensation costs allocated by The Hartford to the Company, as well as pro
forma compensation costs as determined under SFAS No. 123, were immaterial to
the results of operations for 1996 and 1995.
Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". The new standard requires,
among other things, that securities be classified as "held-to-maturity",
"available-for-sale" or "trading" based on the Company's intentions with respect
to the ultimate disposition of the security and its ability to effect those
intentions. The classification determines the appropriate accounting carrying
value (cost basis or fair value) and, in the case of fair value, whether the
fair value difference from cost, net of tax, impacts stockholder's equity
directly or is reflected in the Consolidated Statements of Income. Investments
in equity securities had previously been and continue to be recorded at fair
value with the corresponding after-tax impact included in stockholder's equity.
Under SFAS No. 115, the Company's fixed maturity investments are classified as
"available-for-sale" and, accordingly, these investments are reflected at fair
value with the corresponding impact included as a component of stockholder's
equity designated as "Net unrealized capital gain (loss) on investments, net of
tax." As with the underlying investment security, unrealized capital gains and
losses on derivative financial instruments are considered in determining the
fair value of the portfolios. The impact of adoption was an increase to
stockholder's equity of $91 million. The Company's cash flows were not impacted
by this change in accounting principle.
(C) REVENUE RECOGNITION
Revenues for universal life policies and investment products consist of
policy charges for the cost of insurance, policy administration and surrender
charges assessed to policy account balances and are recognized in the period in
which services are provided. Premiums for traditional life insurance policies
are recognized as revenues when they are due from policyholders.
(D) FUTURE POLICY BENEFITS AND OTHER POLICYHOLDER FUNDS
Liabilities for future policy benefits are computed by the net level premium
method using interest rate assumptions varying from 3% to 11% and withdrawal and
mortality assumptions appropriate at the time the policies were issued.
Liabilities for universal life-type and investment contracts are stated at
policyholder account values before surrender charges.
(E) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, including commissions and certain underwriting
expenses associated with acquiring business, are deferred and amortized over the
estimated lives of the contracts, generally 20 years. Generally, acquisition
costs are deferred and amortized using the retrospective deposit method. Under
the retrospective deposit method, acquisition costs are amortized in proportion
to the present value of expected gross profits from surrender charges,
investment, mortality and expense margins. Actual gross profits can vary from
management's estimates resulting in increases or decreases in the rate of
amortization. Management periodically updates these estimates, when appropriate,
and evaluates the recoverability of the deferred acquisition cost asset. When
appropriate, management revises its assumptions on the estimated gross profits
of these contracts and the cumulative amortization for the books of business are
reestimated and readjusted by a cumulative charge or credit to income.
(F) POLICYHOLDER REALIZED CAPITAL GAINS AND LOSSES
Realized capital gains and losses on security transactions associated with
the Company's immediate participation guaranteed contracts are excluded from
revenues and deferred, since under the terms of the contracts the realized gains
and losses will be credited to policyholders in future years as they are
entitled to receive them.
(G) FOREIGN CURRENCY TRANSLATION
Foreign currency translation gains and losses are reflected in stockholder's
equity. Balance sheet accounts are translated at the exchange rates in effect at
each year end and income statement accounts are translated at the average rates
of exchange prevailing during the year. The national currencies of international
operations are generally their functional currencies.
(H) INVESTMENTS
The Company's investments in fixed maturities include bonds, redeemable
preferred stock and commercial paper which are classified as
"available-for-sale" and accordingly are carried at fair value with the
after-tax difference from cost reflected as a component of stockholder's equity
designated as "Net unrealized capital gain (loss) on investments, net of tax".
Equity securities, which include common and non-redeemable preferred stocks, are
carried at fair value with the after-tax difference from cost reflected in
stockholder's equity. Policy and mortgage loans are each carried at their
outstanding balance which approximates fair value. Investments in partnerships
and trusts are carried at cost. Net realized capital gains (losses), after
deducting the policyholders' share, are reported as a component of revenue and
are determined on a specific identification basis.
The Company's accounting policy for impairment recognition requires
recognition of an other than temporary impairment charge on a security if it is
determined that the Company is unable to recover all amounts due under the
contractual obligations of the security. In addition, the Company has
established specific criteria to be used in the
<PAGE>
52 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
impairment evaluation of an individual portfolio of assets. Specifically, if the
asset portfolio is supporting a runoff operation, is forced to be liquidated
prior to maturity to meet liability commitments, and has fair value below
amortized cost, which will not materially fluctuate as a result of future
interest rate changes, then an other than temporary impairment condition has
been determined to have occurred. Each individual security within that portfolio
is evaluated to determine whether or not it is impaired. Once an impairment
charge has been recorded, the Company then continues to review the individual
impaired securities for appropriate valuation on an ongoing basis.
During 1996, it was determined that certain individual securities within the
investment portfolio supporting the Company's closed block of guaranteed rate
contracts ("Closed Book GRC") were impaired. With the initiation of certain
hedge transactions, which eliminated the possibility that the fair value of the
Closed Book GRC investments would recover to their current amortized cost, an
other than temporary impairment loss of $88 after tax was determined to have
occurred and was recorded.
(I) DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses a variety of derivative financial instruments including
swaps, caps, floors, forwards and exchange traded financial futures and options
as part of an overall risk management strategy. These instruments are used as a
means of hedging exposure to price, foreign currency and/or interest rate risk
on anticipated investment purchases or existing assets and liabilities. The
Company does not hold or issue derivative financial instruments for trading
purposes. The Company's accounting for derivative financial instruments used to
manage risk is in accordance with the concepts established in SFAS No. 80,
"Accounting for Futures Contracts," SFAS No. 52, "Foreign Currency Translation",
American Institute of Certified Public Accountants Statement of Position 86-2,
"Accounting for Options", and various EITF pronouncements. Written options are,
in all cases, used in conjunction with other assets and derivatives as part of
the Company's asset/liability management strategies. Derivative instruments are
carried at values consistent with the asset or liability being hedged.
Derivatives used to hedge fixed maturities or equities are carried at fair value
with the after-tax difference from cost reflected in stockholder's equity.
Derivatives used to hedge other invested assets or liabilities are carried at
cost.
Derivatives must be designated at inception as a hedge and measured for
effectiveness both at inception and on an ongoing basis. The Company's minimum
correlation threshold for hedge designation is 80%. If correlation, which is
assessed monthly and measured based on a rolling three month average, falls
below 80%, hedge accounting will be terminated. Derivatives used to create a
synthetic asset must meet synthetic accounting criteria including designation at
inception and consistency of terms between the synthetic and the instrument
being replicated. Interest rate swaps are the primary type of derivatives used
to convert London interbank offered quotations for U.S. dollar deposits
("LIBOR") based variable rate instruments to fixed rate instruments. Synthetic
instrument accounting, consistent with industry practice, provides that the
synthetic asset is accounted for like the financial instrument it is intended to
replicate. Derivatives which fail to meet risk management criteria are marked to
market with the impact reflected in the Consolidated Statements of Income.
Gains or losses on financial futures contracts entered into in anticipation
of the future receipt of product cash flows are deferred and, at the time of the
ultimate purchase, reflected as an adjustment to the cost basis of the purchased
asset. Gains or losses on futures used in invested asset risk management are
deferred and adjusted into the cost basis of the hedged asset when the futures
contracts are closed, except for futures used in duration hedging which are
deferred and are adjusted into the cost basis on a quarterly basis. The
adjustments to the cost basis are amortized into investment income over the
remaining asset life.
Open forward commitment contracts are marked to market through stockholder's
equity. Such contracts are recorded at settlement by recording the purchase of
the specified securities at the previously committed price. Gains or losses
resulting from the termination of the forward commitment contracts before the
delivery of the securities are recognized immediately in the Consolidated
Statements of Income as a component of net investment income.
The cost of purchased options and/or premiums received on covered written
options, entered into as part of an asset/liability management strategy, is/are
adjusted into the cost basis of the underlying asset or liability and amortized
over the remaining life of the hedge. Gains or losses on expiration or
termination of the hedge are adjusted into the basis of the underlying asset or
liability and amortized over the remaining asset life. The Company had no
written options as of December 31, 1996 and 1995.
Interest rate swaps involve the periodic exchange of payments without the
exchange of underlying principal or notional amounts. Net receipts or payments
are accrued and recognized over the life of the swap agreement as an adjustment
to income. Should the swap be terminated, the gain or loss is adjusted into the
basis of the asset or liability and amortized over the remaining life. Should
the hedged asset be sold or liability terminated without terminating the swap
position, any swap gains or losses are immediately recognized in earnings.
Interest rate swaps purchased in anticipation of an asset purchase (an
"anticipatory transaction") are recognized consistent with the underlying asset
components such that the settlement component is recognized in the Consolidated
Statements of Income while the change in market value is recognized as an
unrealized gain or loss.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 53
- --------------------------------------------------------------------------------
Premiums paid on purchased floor or cap agreements and the premium received
on issued floor or cap agreements (used for risk management) are adjusted into
the basis of the applicable asset and amortized over the asset life. Gains or
losses on termination of such positions are adjusted into the basis of the asset
or liability and amortized over the remaining asset life. Net payments are
recognized as an adjustment to income or basis adjusted and amortized depending
on the specific hedge strategy.
Forward exchange contracts and foreign currency swaps are accounted for in
accordance with SFAS No. 52.
(J) RELATED PARTY TRANSACTIONS
Transactions of the Company with HLA and its affiliates relate principally
to tax settlements, reinsurance, insurance coverage, rental and service fees and
payment of dividends and capital contributions. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and employee
benefit plan expenses, are initially paid by Hartford Fire Insurance Company, an
indirect subsidiary of The Hartford ("Hartford Fire"). Direct expenses are
allocated to the Company using specific identification, and indirect expenses
are allocated using other applicable methods. Indirect expenses include those
for corporate areas which, depending on the type, are allocated based on either
a percentage of direct expenses or on utilization. Indirect expenses allocated
to the Company by Hartford Fire were $40, $45 and $41 in 1996, 1995 and 1994,
respectively. Management of the Company believes that the methods used are
reasonable. In addition, the Company was charged its share of costs allocated to
The Hartford by ITT prior to the ITT Spin-off, which were immaterial in 1995 and
1994. The Company had a receivable from The Hartford of $1 and a payable to The
Hartford of $2 at December 31, 1996 and 1995, respectively.
In 1996, the Company ceded approximately $33.3 billion of group life
insurance in force and $318 million of disability premium to HLA and assumed
$8.5 billion of individual life insurance in force from HLA.
On June 30, 1995, the ownership of ITT Lyndon Insurance Company was
transferred to the Company via a capital contribution of $181 million,
representing the net assets of the company. Also, in 1996, the Company received
a capital contribution of $37.5 million from its parent HLA.
(K) DIVIDENDS TO POLICYHOLDERS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of the life insurance
subsidiaries of the Company. The participating insurance in force accounted for
44%, 41%, and 43% in 1996, 1995, and 1994, respectively, of total life insurance
in force.
- ---------------------------------------------------
3. INVESTMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest income................ $ 1,452 $ 1,338 $ 1,247
(Losses) income from other
investments................... (42) 1 54
--------- --------- ---------
Gross investment income........ 1,410 1,339 1,301
Less: Investment expenses...... 13 11 9
--------- --------- ---------
Net investment income.......... $ 1,397 $ 1,328 $ 1,292
--------- --------- ---------
--------- --------- ---------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Fixed maturities............... $ (201) $ 23 $ (34)
Equity securities.............. 2 (6) (11)
Real estate and other.......... (4) (25) 47
Less: (Increase) decrease in
liability to policyholders for
realized capital gains
(losses)...................... (10) (3) 5
--------- --------- ---------
Net realized capital (losses)
gains......................... $ (213) $ (11) $ 7
--------- --------- ---------
--------- --------- ---------
</TABLE>
(C) NET UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY SECURITIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
----- ----- ---------
<S> <C> <C> <C>
Gross unrealized gains........... $ 13 $ 4 $ 2
Gross unrealized losses.......... (1) (2) (11)
--- --- ---------
Net unrealized capital gains
(losses)........................ 12 2 (9)
Deferred income tax liability
(asset)......................... 4 1 (3)
--- --- ---------
Net unrealized capital gains
(losses), after tax............. 8 1 (6)
Balance beginning of year........ 1 (6) (5)
--- --- ---------
Change in net unrealized capital
gains (losses) on investments... $ 7 $ 7 $ (1)
--- --- ---------
--- --- ---------
</TABLE>
<PAGE>
54 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Gross unrealized gains..................................................................................... $ 386 $ 529
Gross unrealized losses.................................................................................... (341) (569)
Unrealized (gains) losses credited to policyholders........................................................ (11) (52)
--------- ---------
Net unrealized capital gains (losses)...................................................................... 34 (92)
Deferred income tax liability (asset)...................................................................... 12 (34)
--------- ---------
Net unrealized capital gains (losses), after tax........................................................... 22 (58)
Balance beginning of year.................................................................................. (58) (648)
--------- ---------
Change in net unrealized capital gains (losses) on investments............................................. $ 80 $ 590
--------- ---------
--------- ---------
<CAPTION>
1994
---------
<S> <C>
Gross unrealized gains..................................................................................... $ 150
Gross unrealized losses.................................................................................... (1,185)
Unrealized (gains) losses credited to policyholders........................................................ 37
---------
Net unrealized capital gains (losses)...................................................................... (998)
Deferred income tax liability (asset)...................................................................... (350)
---------
Net unrealized capital gains (losses), after tax........................................................... (648)
Balance beginning of year.................................................................................. 161
---------
Change in net unrealized capital gains (losses) on investments............................................. $ (809)
---------
---------
</TABLE>
(E) COMPONENTS OF FIXED MATURITIES INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
---------------------------------
GROSS UNREALIZED
AMORTIZED --------------------
COST GAINS LOSSES
----------- --------- ---------
<S> <C> <C> <C>
U.S. government and government agencies and authorities (guaranteed and sponsored)............ $ 166 $ 12 $ (3)
U.S. government and government agencies and authorities (guaranteed and
sponsored)--asset-backed..................................................................... 1,970 161 (128)
States, municipalities and political subdivisions............................................. 373 6 (11)
International governments..................................................................... 281 12 (4)
Public utilities.............................................................................. 877 12 (8)
All other corporate including international................................................... 4,656 120 (107)
All other corporate--asset-backed............................................................. 3,601 49 (59)
Short-term investments........................................................................ 1,655 14 (21)
----------- --------- ---------
Total fixed maturities.................................................................... $ 13,579 $ 386 $ (341)
----------- --------- ---------
----------- --------- ---------
<CAPTION>
AS OF DECEMBER 31, 1995
---------------------------------
GROSS UNREALIZED
AMORTIZED --------------------
COST GAINS LOSSES
----------- --------- ---------
<S> <C> <C> <C>
U.S. government and government agencies and authorities (guaranteed and sponsored)............ $ 502 $ 4 $ (9)
U.S. government and government agencies and authorities (guaranteed and
sponsored)--asset-backed..................................................................... 3,568 210 (387)
States, municipalities and political subdivisions............................................. 201 4 (3)
International governments..................................................................... 291 19 (4)
Public utilities.............................................................................. 949 29 (2)
All other corporate including international................................................... 3,065 76 (55)
All other corporate--asset-backed............................................................. 5,056 187 (109)
Short-term investments........................................................................ 808 -- --
----------- --------- ---------
Total fixed maturities.................................................................... $ 14,440 $ 529 $ (569)
----------- --------- ---------
----------- --------- ---------
<CAPTION>
FAIR
VALUE
---------
<S> <C>
U.S. government and government agencies and authorities (guaranteed and sponsored)............ $ 175
U.S. government and government agencies and authorities (guaranteed and
sponsored)--asset-backed..................................................................... 2,003
States, municipalities and political subdivisions............................................. 368
International governments..................................................................... 289
Public utilities.............................................................................. 881
All other corporate including international................................................... 4,669
All other corporate--asset-backed............................................................. 3,591
Short-term investments........................................................................ 1,648
---------
Total fixed maturities.................................................................... $ 13,624
---------
---------
FAIR
VALUE
---------
<S> <C>
U.S. government and government agencies and authorities (guaranteed and sponsored)............ $ 497
U.S. government and government agencies and authorities (guaranteed and
sponsored)--asset-backed..................................................................... 3,391
States, municipalities and political subdivisions............................................. 202
International governments..................................................................... 306
Public utilities.............................................................................. 976
All other corporate including international................................................... 3,086
All other corporate--asset-backed............................................................. 5,134
Short-term investments........................................................................ 808
---------
Total fixed maturities.................................................................... $ 14,400
---------
---------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 55
- --------------------------------------------------------------------------------
The amortized cost and fair value of fixed maturities at December 31, 1996,
by maturity, are shown below. Asset-backed securities, including mortgage-backed
securities and collateralized mortgage obligations, are distributed to maturity
year based on the Company's estimates of the rate of future prepayments of
principal over the remaining lives of such securities. These estimates are
developed using prepayment speeds reported in broker consensus data and can be
expected to vary from actual experience. Expected maturities differ from
contractual maturities due to call or prepayment provisions.
<TABLE>
<CAPTION>
MATURITY AMORTIZED COST FAIR VALUE
- -------------------------- -------------- -----------
<S> <C> <C>
One year or less.......... $ 2,632 $ 2,642
Over one year through five
years.................... 5,871 5,928
Over five years through
ten years................ 3,320 3,311
Over ten years............ 1,756 1,743
------- -----------
Total................. $ 13,579 $ 13,624
------- -----------
------- -----------
</TABLE>
Sales of fixed maturities excluding short-term fixed maturities for the
years ended December 31, 1996, 1995 and 1994 resulted in proceeds of $3,459,
$4,848 and $5,708, respectively, resulting in gross realized capital gains of
$87, $91 and $71, respectively, and gross realized capital losses (including
investment writedowns) of $298, $72 and $100, respectively, not including
policyholder gains and losses. Sales of equity securities for the years ended
December 31, 1996, 1995 and 1994 resulted in proceeds of $74, $64 and $159,
respectively, resulting in gross realized capital gains of $2, $28 and $3,
respectively, and gross realized capital losses of $0, $59 and $14,
respectively, not including policyholder gains and losses.
(F) CONCENTRATION OF CREDIT RISK
As of December 31, 1996, the Company had a reinsurance recoverable of $3.8
billion from Mutual Benefit Life Assurance Corporation ("Mutual Benefit"),
supported by assets in a security trust of $3.8 billion (including policy loans
of $3.3 billion). The risk of Mutual Benefit becoming insolvent is mitigated by
the reinsurance agreement's requirement that the assets be kept in a security
trust with the Company as sole beneficiary. Excluding investments in U.S.
government and agencies, the Company has no other significant concentrations of
credit risk in fixed maturities.
(G) DERIVATIVE INVESTMENTS
Derivatives play an important role in facilitating the management of
interest rate risk, creating opportunities to fund product obligations hedging
against indexation risks that affect the value of certain liabilities and
adjusting broad investment risk characteristics when dictated by significant
changes in market risks. As an end user of derivatives, the Company uses a
variety of derivative financial instruments, including swaps, caps, floors,
forwards and exchange traded financial futures and options in order to hedge
exposure to price, foreign currency and/or interest rate risk on anticipated
investment purchases or existing assets and liabilities. The notional amounts of
derivative contracts represent the basis upon which pay and receive amounts are
calculated and are not reflective of credit risk for derivative contracts.
Credit risk for derivative contracts is limited to the amounts calculated to be
due to the Company on such contracts. The Company believes it maintains prudent
policies regarding the financial stability and credit standing of its major
counterparties and typically requires credit enhancement provisions to further
limit its credit risk. Many of these derivative contracts are bilateral
agreements that are not assignable without the consent of the relevant
counterparty. Notional amounts pertaining to derivative financial instruments
totaled $9.9 billion and $8.8 billion at December 31, 1996 and 1995,
respectively ($7.4 billion and $7.1 billion related to life insurance
investments and $2.5 billion and $1.7 billion related to life insurance
liabilities at December 31, 1996 and 1995, respectively).
<PAGE>
56 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
The following table summarizes the Company's derivatives, segregated by
major categories, as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
AMOUNTS HEDGED (NOTIONAL AMOUNTS) (EXCLUDING
LIABILITY HEDGES)
--------------------------------------------------
PURCHASED
TOTAL ISSUED CAPS OPTIONS,
CARRYING & CAPS &
1996 VALUE FLOORS(C) FLOORS(D) FUTURES(E)
- ------------------------------------------------------------------------ --------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Asset-backed securities (excluding inverse floaters and anticipatory)... $ 5,242 $ 500 $ 2,454 $ --
Inverse floaters(a)..................................................... 352 98 856 --
Anticipatory(g)......................................................... -- -- -- 132
Other bonds and notes................................................... 7,369 425 440 5
Short-term investments.................................................. 661 -- -- --
--------- ----------- ----------- -----
Total fixed maturities.............................................. 13,624 1,023 3,750 137
Equity securities, policy loans and other investments................... 4,011 -- -- --
--------- ----------- ----------- -----
Total investments................................................... $ 17,635 $ 1,023 $ 3,750 $ 137
--------- ----------- ----------- -----
--------- ----------- ----------- -----
Total derivatives-fair value(b)..................................... $ (10) $ 35 $ --
----------- ----------- -----
----------- ----------- -----
<CAPTION>
AMOUNTS HEDGED (NOTIONAL AMOUNTS) (EXCLUDING
LIABILITY HEDGES)
--------------------------------------------------
PURCHASED
TOTAL ISSUED CAPS OPTIONS,
CARRYING & CAPS &
1995 VALUE FLOORS(C) FLOORS(D) FUTURES(E)
- ------------------------------------------------------------------------ --------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Asset-backed securities (excluding inverse floaters and anticipatory)... $ 5,764 $ 118 $ 3,133 $ 322
Inverse floaters(a)..................................................... 711 560 354 6
Anticipatory(g)......................................................... -- -- -- 213
Other bonds and notes................................................... 7,118 33 66 322
Short-term investments.................................................. 807 -- -- --
--------- ----------- ----------- -----
Total fixed maturities.............................................. 14,400 711 3,553 863
Equity securities, policy loans and other investments................... 3,865 -- -- --
--------- ----------- ----------- -----
Total investments................................................... $ 18,265 $ 711 $ 3,553 $ 863
--------- ----------- ----------- -----
--------- ----------- ----------- -----
Total derivatives-fair value(b)..................................... $ (32) $ 46 $ --
----------- ----------- -----
----------- ----------- -----
<CAPTION>
INTEREST FOREIGN TOTAL
RATE CURRENCY NOTIONAL
1996 SWAPS(H) SWAPS(F) AMOUNT
- ------------------------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Asset-backed securities (excluding inverse floaters and anticipatory)... $ 941 $ -- $ 3,895
Inverse floaters(a)..................................................... 346 -- 1,300
Anticipatory(g)......................................................... -- -- 132
Other bonds and notes................................................... 1,079 125 2,074
Short-term investments.................................................. -- -- --
----------- ----- -----------
Total fixed maturities.............................................. 2,366 125 7,401
Equity securities, policy loans and other investments................... 19 -- 19
----------- ----- -----------
Total investments................................................... $ 2,385 $ 125 $ 7,420
----------- ----- -----------
----------- ----- -----------
Total derivatives-fair value(b)..................................... $ (25) $ (9) $ (9)
----------- ----- -----------
----------- ----- -----------
INTEREST FOREIGN TOTAL
RATE CURRENCY NOTIONAL
1995 SWAPS(H) SWAPS(F) AMOUNT
- ------------------------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Asset-backed securities (excluding inverse floaters and anticipatory)... $ 290 $ -- $ 3,863
Inverse floaters(a)..................................................... 681 -- 1,601
Anticipatory(g)......................................................... 25 -- 238
Other bonds and notes................................................... 757 187 1,365
Short-term investments.................................................. -- -- --
----------- ----- -----------
Total fixed maturities.............................................. 1,753 187 7,067
Equity securities, policy loans and other investments................... 18 -- 18
----------- ----- -----------
Total investments................................................... $ 1,771 $ 187 $ 7,085
----------- ----- -----------
----------- ----- -----------
Total derivatives-fair value(b)..................................... $ (108) $ (24) $ (118)
----------- ----- -----------
----------- ----- -----------
</TABLE>
- ------------------------
(a) Inverse floaters are variations of collateralized mortgage obligations
("CMOs") for which the coupon rates move inversely with an index rate such
as LIBOR. The risk to principal is considered negligible as the underlying
collateral for the securities is guaranteed or sponsored by government
agencies. To address the volatility risk created by the coupon variability,
the Company uses a variety of derivative instruments, primarily interest
rate swaps and purchased caps and floors.
(b) The fair value of derivative instruments including swaps, caps, floors,
futures, options and forward commitments, was determined using a pricing
model which is validated through quarterly comparison to dealer quoted
market prices, for 1996 and dealer quoted prices for 1995.
(c) The 1996 data includes issued caps of $433 with a weighted average strike
rate of 8.21% (ranging from 7.0% to 9.5%) and over 93% maturing in 2000
through 2005. In addition, issued floors totaled $590, had a weighted
average strike rate of 5.17% (ranging from 5.00% to 7.85%) with all of them
maturing by the end of 2005. The 1995 data includes issued caps of $475 with
a weighted average strike rate of 8.5% (ranging from 7.0% to 10.4%) and over
85% maturing in 2000 through 2004. In addition, issued floors totaled $236,
had a weighted average strike rate of 8.1% (ranging from 5.3% to 10.9%) and
mature through 2007, with 76% maturing by 2004.
(d) The 1996 data includes purchased floors of $2.4 billion and purchased caps
of $1.3 billion. The floors had a weighted average strike rate of 5.84%
(ranging from 3.70% to 7.85%) and over 87% mature in 1997 through 1999. The
options mature in 1997. The caps had a weighted average strike rate of 7.59%
(ranging from 4.40% to 10.125%) and over 76% mature in 1997 through 2001.
The 1995 data includes purchased floors of $1.8 billion and purchased caps
of $1.7 billion. The floors had a weighted average strike price of 5.8%
(ranging from 3.7% to 6.8%) and over 85% mature in 1997 through 1999. The
caps had a weighted average strike price of 7.5% (ranging from 4.5% and
10.1%) and over 82% mature in 1997 through 1999.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 57
- --------------------------------------------------------------------------------
(e) As of December 31, 1996 and 1995, over 39% and 95%, respectively, of the
notional futures contracts, expire within one year.
(f) As of December 31, 1996 and 1995, over 42% and 25%, respectively, of the
Company's foreign currency swaps, expire within one year; the balance mature
over the succeeding 4 to 5 years.
(g) Deferred gains and losses on anticipatory transactions are included in the
carrying value of bond investments in the Consolidated Balance Sheets. At
the time of the ultimate purchase, they are reflected as a basis adjustment
to the purchased asset. At December 31, 1996, the Company had $1 million in
net deferred gains for futures, interest rate swaps and purchased options.
The Company expects to basis adjust $1 million of the deferred gains in
1997. At December 31, 1995, the Company had $5.3 million in net deferred
gains for futures, interest rate swaps and purchased options.
(h) The following table summarizes the maturities by notional value of interest
rate swaps outstanding at December 31, 1996 and 1995, and the related
weighted average interest pay rate or receive rate. The variable rates
represent spot rates (primarily 90 day LIBOR), as of December 31, 1996 and
1995. Such variable rates have been calculated assuming that the spot rates
remain unchanged throughout the life of the interest rate swaps.
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001
- ------------------------------------------------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PAY FIXED/RECEIVE VARIABLE
Notional Value $-- $50 $125 $35 $125
Weighted Average Pay Rate -- 5.7 % 5.9 % 5.5 % 5.5%
Weighted Average Receive Rate -- 3.2 % -- 6.5 % 6.4%
PAY VARIABLE/RECEIVE FIXED
Notional Value $86 $25 $486 $74 $582
Weighted Average Pay Rate 7.5 % -- 6.4 % 6.7 % 7.0%
Weighted Average Receive Rate 5.6 % -- 5.6 % 5.7 % 6.2%
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE
Notional Value $19 $15 $-- $200 $--
Weighted Average Pay Rate 5.9 % 5.7 % -- 6.4 % --
Weighted Average Receive Rate 3.7 % 5.5 % -- 5.0 % --
Total Interest Rate Swaps $105 $90 $611 $309 $707
Total Weighted Average Pay Rate 7.2 % 5.7 % 6.3 % 6.4 % 6.7%
Total Weighted Average Receive Rate 5.2 % 3.8 % 4.3 % 5.4 % 6.3%
<CAPTION>
1995 1996 1997 1998 1999 2000
- ------------------------------------------------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PAY FIXED/RECEIVE VARIABLE
Notional Value $15 $50 $-- $453 $31
Weighted Average Pay Rate 5.0 % 7.2 % -- 8.1 % 7.1%
Weighted Average Receive Rate 5.8 % 5.9 % -- 5.8 % 5.7%
PAY VARIABLE/RECEIVE FIXED
Notional Value $100 $68 $25 $25 $35
Weighted Average Pay Rate 5.9 % 8.6 % 5.9 % -- 5.9%
Weighted Average Receive Rate 2.4 % 7.9 % 4.0 % -- 6.5%
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE
Notional Value $50 $18 $36 $12 $200
Weighted Average Pay Rate 5.8 % -- 3.7 % 3.5 % 4.5%
Weighted Average Receive Rate 5.4 % -- 5.6 % 5.2 % 6.8%
Total Interest Rate Swaps $165 $136 $61 $490 $266
Total Weighted Average Pay Rate 5.8 % 7.8 % 4.6 % 7.6 % 5.0%
Total Weighted Average Receive Rate 3.6 % 7.2 % 4.9 % 5.4 % 6.6%
<CAPTION>
LATEST
1996 THEREAFTER TOTAL MATURITY
- ------------------------------------------------------------ ------------- ----------- -----------
<S> <C> <C> <C>
PAY FIXED/RECEIVE VARIABLE
Notional Value $170 $505 2003
Weighted Average Pay Rate 5.7 % 5.7 %
Weighted Average Receive Rate 6.9 % 4.7 %
PAY VARIABLE/RECEIVE FIXED
Notional Value $349 $1,602 2007
Weighted Average Pay Rate 6.9 % 6.8 %
Weighted Average Receive Rate 5.9 % 5.9 %
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE
Notional Value $44 $278 2003
Weighted Average Pay Rate 12.9 % 7.4 %
Weighted Average Receive Rate 6.4 % 5.2 %
Total Interest Rate Swaps $563 $2,385 2007
Total Weighted Average Pay Rate 7.0 % 6.6 %
Total Weighted Average Receive Rate 6.3 % 5.5 %
LATEST
1995 THEREAFTER TOTAL MATURITY
- ------------------------------------------------------------ ------------- ----------- -----------
<S> <C> <C> <C>
PAY FIXED/RECEIVE VARIABLE
Notional Value $229 $778 2004
Weighted Average Pay Rate 7.8 % 7.8 %
Weighted Average Receive Rate 5.9 % 5.9 %
PAY VARIABLE/RECEIVE FIXED
Notional Value $190 $443 2007
Weighted Average Pay Rate 5.4 % 5.4 %
Weighted Average Receive Rate 6.9 % 6.9 %
PAY VARIABLE/RECEIVE DIFFERENT VARIABLE
Notional Value $234 $550 2004
Weighted Average Pay Rate 16.3 % 5.7 %
Weighted Average Receive Rate 5.9 % 6.4 %
Total Interest Rate Swaps $653 $1,771 2007
Total Weighted Average Pay Rate 7.3 % 6.9 %
Total Weighted Average Receive Rate 6.3 % 5.8 %
</TABLE>
In addition, interest rate sensitivity related to certain Company insurance
liabilities was altered primarily through interest rate swap agreements. The
notional amount of the liability agreements in which the Company generally pays
one variable rate in exchange for another was $2.4 billion and $1.7 billion at
December 31, 1996 and 1995, respectively. As of December 31, 1996, the weighted
average pay rate was 5.6% and the weighted average receive rate was 6.5%. These
agreements mature at various times through 2001.
<PAGE>
58 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
A reconciliation between notional amounts at December 31, 1995 and 1996 by
derivative type and strategy is as follows:
<TABLE>
<CAPTION>
BY DERIVATIVE TYPE
---------------------------------------------
12/31/95 MATURITIES/
NOTIONAL AMOUNT ADDITIONS TERMINATIONS
----------------- ----------- -------------
<S> <C> <C> <C>
Caps..................................................................... $ 2,184 $ 1,286 $ 1,715
Floors................................................................... 2,180 2,053 1,065
Options.................................................................. -- 10 --
Swaps/Forwards........................................................... 3,566 3,989 2,694
Futures.................................................................. 863 2,092 2,818
------ ----------- ------
Total................................................................ $ 8,793 $ 9,430 $ 8,292
------ ----------- ------
------ ----------- ------
<CAPTION>
BY STRATEGY
---------------------------------------------
12/31/95 MATURITIES/
NOTIONAL AMOUNT ADDITIONS TERMINATIONS
----------------- ----------- -------------
<S> <C> <C> <C>
Liability................................................................ $ 1,708 $ 1,940 $ 1,137
Anticipatory............................................................. 238 516 622
Asset.................................................................... 2,984 1,265 2,137
Portfolio................................................................ 3,863 5,709 4,396
------ ----------- ------
Total................................................................ $ 8,793 $ 9,430 $ 8,292
------ ----------- ------
------ ----------- ------
<CAPTION>
12/31/96
NOTIONAL AMOUNT
-----------------
<S> <C>
Caps..................................................................... $ 1,755
Floors................................................................... 3,168
Options.................................................................. 10
Swaps/Forwards........................................................... 4,861
Futures.................................................................. 137
------
Total................................................................ $ 9,931
------
------
12/31/96
NOTIONAL AMOUNT
-----------------
<S> <C>
Liability................................................................ $ 2,511
Anticipatory............................................................. 132
Asset.................................................................... 2,112
Portfolio................................................................ 5,176
------
Total................................................................ $ 9,931
------
------
</TABLE>
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF DECEMBER 31,
1996 1995
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities............................................................. $ 13,624 $ 13,624 $ 14,400 $ 14,400
Equity securities............................................................ 119 119 63 63
Policy loans................................................................. 3,836 3,836 3,381 3,381
Mortgage loans............................................................... 2 2 265 265
Investments in partnerships and trust........................................ 48 48 94 97
Other........................................................................ 6 56 62 62
LIABILITIES
Other policy benefits........................................................ $ 11,707 $ 11,469 $ 12,727 $ 12,767
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument: fair value for fixed maturities and
equity securities approximate those quotations published by applicable stock
exchanges or received from other reliable sources; policy and mortgage loan
carrying amounts approximate fair value; investments in partnerships and trusts
are based on external market valuations from partnership and trust managements;
fair value of derivative instruments, including swaps, caps, floors, futures,
and forward commitments, is determined by using a pricing model which is
validated through quarterly comparison to dealer quoted market prices; and other
policy benefits payable for investment type contracts are determined by
estimating future cash flows discounted at the year end market rate.
- ---------------------------------------------------
4. INCOME TAX
Hartford Life and The Hartford have entered into a tax sharing agreement
under which each member, including the Company, in the consolidated U.S. federal
income tax return will make payments between them such that, with respect to any
period, the amount of taxes to be paid by Hartford Life for the Company, subject
to certain adjustments, generally will be determined as though the Company were
to file separate federal, state and local income tax returns.
As long as The Hartford continues to beneficially own, directly or
indirectly, at least 80% of the combined voting power and 80% of the value of
the outstanding capital stock of Hartford Life, the Company will be included for
federal income tax purposes in the consolidated group of which The Hartford is
the common parent. It is the current intention of The Hartford and its
subsidiaries to continue to file a consolidated federal income tax return. The
Company will continue to remit to (receive from) The Hartford a current income
tax provision (benefit) computed in accordance with such tax sharing agreement.
The Company's effective tax rate was 35%, 32% and 32% in 1996, 1995 and 1994,
respectively.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 59
- --------------------------------------------------------------------------------
Income tax expense was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current............................. $ 122 $ 211 $ 185
Deferred........................... (102) (149) (120)
--------- --------- ---------
Total............................ $ 20 $ 62 $ 65
--------- --------- ---------
--------- --------- ---------
</TABLE>
A reconciliation of the tax provision at the U.S. federal statutory rate to
the provision for income taxes was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Tax provision at U.S. statutory
rate............................... $ 20 $ 67 $ 71
Tax-exempt income.................. -- (3) (3)
Foreign tax credit................. -- (4) (1)
Other.............................. -- 2 (2)
--------- --------- ---------
Total............................ $ 20 $ 62 $ 65
--------- --------- ---------
--------- --------- ---------
</TABLE>
Income taxes paid were $189, $162 and $244 in 1996, 1995 and 1994,
respectively. The current tax refund due from The Hartford to the Company was
$72 and $8 as of December 31, 1996 and 1995, respectively.
Deferred tax assets (liabilities) included the following:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Tax return deferred acquisition costs......... $ 514 $ 410
Financial statement deferred acquisition costs
and reserves................................. (242) 138
Employee benefits............................. 8 8
Unrealized (gain) loss on investments......... (16) 32
Investments and other......................... 210 (168)
--------- ---------
Total..................................... $ 474 $ 420
--------- ---------
--------- ---------
</TABLE>
Prior to the Tax Reform Act of 1984, the Life Insurance Company Income Tax
Act of 1959 permitted the deferral from taxation of a portion of statutory
income under certain circumstances. In such circumstances, the deferred income
was accumulated in a "Policyholders' Surplus Account" and will be taxable in the
future only under conditions which management considers to be remote; therefore,
no Federal income taxes have been provided on this deferred income. The balance
for tax return purposes of the Policyholders' Surplus Account as of December 31,
1996 was $37.
- ---------------------------------------------------
5. REINSURANCE
The Company cedes insurance to non-affiliated insurers in order to limit its
maximum loss. Such transfer does not relieve the Company of its primary
liability. The Company also assumes insurance from other insurers.
Life insurance net retained premiums were comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Gross premiums..................... $ 1,834 $ 1,545 $ 1,316
Insurance assumed.................. 173 591 299
Insurance ceded.................... (302) (649) (515)
--------- --------- ---------
Total.......................... $ 1,705 $ 1,487 $ 1,100
--------- --------- ---------
--------- --------- ---------
</TABLE>
Life reinsurance recoveries, which reduced death and other benefits, for the
years ended December 31, 1996, 1995 and 1994 approximated $140, $220 and $164,
respectively.
In December 1994, the Company ceded to a third party $1.0 billion in
individual fixed and variable annuities on a modified coinsurance basis. In
December 1995, the Company ceded approximately $1.2 billion in individual
variable annuities on a modified coinsurance basis to a third party. These
transactions did not have a material impact on consolidated net income.
In May 1994, the Company assumed the life insurance policies and the
individual annuities of Pacific Standard with reserves and account values of
approximately $434 million. The Company received cash and investment grade
assets to support the life insurance and individual annuity contract obligations
assumed.
- ---------------------------------------------------
6.PENSION PLANS AND OTHER POSTRETIREMENT
BENEFITS
The Company's employees are included in Hartford Fire's noncontributory
defined benefit pension plans. These plans provide pension benefits that are
based on years of service and the employee's compensation during the last ten
years of employment. The Company's funding policy is to contribute annually an
amount between the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974, as amended, and the maximum amount that
can be deducted for Federal income tax purposes. Generally, pension costs are
funded through the purchase of the Company's group pension contracts. The cost
to the Company was approximately $5, $2 and $2 in 1996, 1995 and 1994,
respectively.
The Company also provides, through Hartford Fire, certain health care and
life insurance benefits for eligible retired employees. A substantial portion of
the Company's employees may become eligible for these benefits upon retirement.
The Company's contribution for health care benefits will depend on the retiree's
date of retirement and years of service. In addition, the plan has a defined
dollar cap which limits average Company contributions. The Company has prefunded
a portion of the health care and life insurance obligations through trust funds
where such prefunding can be accomplished on a tax effective basis.
<PAGE>
60 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Postretirement health care and life insurance benefits expense, allocated by The
Hartford, was immaterial for 1996, 1995 and 1994, respectively.
The assumed rate of future increases in the per capita cost of health care
(the health care trend rate) was 9.3% for 1996, decreasing ratably to 6.0% in
the year 2001. Increasing the health care trend rates by one percent per year
would have an immaterial impact on the accumulated postretirement benefit
obligation and the annual expense. To the extent that the actual experience
differs from the inherent assumptions, the effect will be amortized over the
average future service of the covered employees.
- ---------------------------------------------------
7. BUSINESS SEGMENT INFORMATION
The Company sells financial products such as fixed and variable annuities,
retirement plan services, and life insurance on both an individual and a group
basis. The Company divides its core businesses into three segments: Investment
Products, Individual Life Insurance and Employee Benefits. In addition, the
Company also maintains a corporate operation and also classifies certain of its
business as Runoff operations. The Investment Products segment offers individual
variable annuities and fixed market value adjusted annuities, deferred
compensation and retirement plan services, mutual funds, investment management
services and other financial products. The Individual Life Insurance segment
sells a variety of individual life insurance products, including variable life,
universal life, and interest-sensitive whole life policies. The Employee
Benefits segment sells corporate owned life insurance. Through its corporate
operation, the Company reports net investment income on assets representing
surplus not assigned to any of its business segments and certain other revenues
and expenses not specifically allocable to any of its business segments. The
Company's Runoff operations are comprised of Closed Book GRC. With the exception
of Closed Book GRC, net realized capital gains and losses are recognized in the
period of realization but are allocated to the segments utilizing durations of
the segment portfolios.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
REVENUES
Investment Products............... $ 1,013 $ 759 $ 594
Individual Life Insurance......... 440 383 375
Employee Benefits................. 1,366 1,273 919
Corporate Operations.............. 81 52 30
Runoff Operations................. (11) 337 481
--------- --------- ---------
Total Revenues.................. $ 2,889 $ 2,804 $ 2,399
--------- --------- ---------
--------- --------- ---------
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
INCOME BEFORE INCOME TAX EXPENSE
Investment Products............... $ 230 $ 172 $ 127
Individual Life Insurance......... 68 56 39
Employee Benefits................. 43 37 27
Corporate Operations.............. 65 16 8
Runoff Operations................. (348) (90) 2
--------- --------- ---------
Income Before Income Tax
Expense........................ $ 58 $ 191 $ 203
--------- --------- ---------
--------- --------- ---------
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Investment Products............... $ 53,743 $ 40,624 $ 29,115
Individual Life Insurance......... 3,753 3,173 2,808
Employee Benefits................. 14,515 13,494 7,847
Corporate Operations.............. 1,891 1,729 822
Runoff Operations................. 3,667 5,177 7,257
--------- --------- ---------
Total Assets.................... $ 77,569 $ 64,197 $ 47,849
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ---------------------------------------------------
8. STATUTORY NET INCOME AND SURPLUS
A significant percentage of the consolidated statutory surplus is
permanently reinvested or is subject to various state regulatory restrictions
which limit the payment of dividends without prior approval. The total amount of
statutory dividends which may be paid by the insurance subsidiaries of the
Company in 1997, without prior approval, is estimated to be $121 million.
Statutory net income and surplus as of and for the years ended December 31 were:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Statutory net income...... $ 144 $ 112 $ 58
Statutory surplus......... $ 1,207 $ 1,125 $ 941
</TABLE>
The insurance subsidiaries of the Company prepare their statutory financial
statements in accordance with accounting practices prescribed by the State of
Connecticut Insurance Department. Prescribed statutory accounting practices
include publications of the National Association of Insurance Commissioners
("NAIC"), as well as state laws, regulations, and general administrative rules.
- ---------------------------------------------------
9. SEPARATE ACCOUNTS
The Company maintained separate account assets and liabilities totaling
$49.7 billion and $36.3 billion at December 31, 1996 and 1995, respectively,
which are reported at fair value. Separate account assets are segregated from
other investments, and investment income and gains and losses accrue directly to
the policyholder. Separate accounts reflect two categories of risk assumption:
non-guaranteed separate accounts totaling $39.4 billion and $25.9 billion at
December 31, 1996 and 1995, respectively, wherein the policyholder assumes the
investment risk, and
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 61
- --------------------------------------------------------------------------------
guaranteed separate account assets totaling $10.3 billion at December 31, 1996
and 1995, wherein the Company contractually guarantees either a minimum return
or account value to the policyholder. Included in the non-guaranteed category
are policy loans totaling $2.0 billion and $1.7 billion at December 31, 1996 and
1995, respectively. Investment income (including investment gains and losses)
and interest credited to policyholders on separate account assets are not
reflected in the Consolidated Statements of Income. Separate account management
fees, net of minimum guarantees, were $538, $387 and $256 in 1996, 1995 and
1994, respectively.
The guaranteed separate accounts include modified guaranteed individual
annuity and modified guaranteed life insurance. The average credited interest
rate on these contracts was 6.53% at December 31, 1996. The assets that support
these liabilities were comprised of $10.2 billion in fixed maturities at
December 31, 1996. The portfolios are segregated from other investments and are
managed so as to minimize liquidity and interest rate risk. To minimize the risk
of disintermediation associated with early withdrawals, individual annuity and
modified guaranteed life insurance contracts carry a graded surrender charge as
well as a market value adjustment. Additional investment risk is hedged using a
variety of derivatives which totaled $0.1 billion in carrying value and $2.4
billion in notional amounts at December 31, 1996.
- ---------------------------------------------------
10. COMMITMENTS AND CONTINGENCIES
Under insurance guaranty fund laws existing in each state, the District of
Columbia and Puerto Rico, insurers licensed to do business can be assessed by
state insurance guaranty associations for certain obligations of insolvent
insurance companies to policyholders and claimants. Recent regulatory actions
against certain large life insurers encountering financial difficulty have
prompted various state insurance guaranty associations to begin assessing life
insurance companies for the deemed losses. Most of these laws do provide,
however, that an assessment may be excused or deferred if it would threaten an
insurer's solvency and further provide annual limits on such assessments. A
large part of the assessments paid by the Company's insurance subsidiaries
pursuant to these laws may be used as credits for a portion of the Company's
insurance subsidiaries' premium taxes. The Company paid guaranty fund
assessments of approximately $11, $10 and $8 in 1996, 1995 and 1994,
respectively, of which $5, $6 and $4 were estimated to be creditable against
premium taxes.
The Company is a defendant in various lawsuits arising in the ordinary
course of business. In the opinion of management, the resolution of these
matters is not expected to have a material adverse effect on the Company's
business, financial position, or results of operations.
The rent paid to Hartford Fire for the space occupied by the Company was $3
in 1996, 1995, and 1994. The Company expects to pay annual rent of $7 in 1997,
1998, and 1999, respectively, $12 in 2000 and 2001, and $96 thereafter, over the
remaining term of the sublease, which expires on December 31, 2009. Rental
expense is recognized on a level basis over the term of the sublease and
amounted to approximately $8 in 1996, 1995 and 1994.
- ---------------------------------------------------
11. SUBSEQUENT EVENTS
On February 10, 1997, Hartford Life filed a registration statement with the
Securities and Exchange Commission relating to the U.S. and international
offerings of shares of Class A common stock (the "Equity Offerings")
representing up to 20% ownership of Hartford Life. After completion of the
Equity Offerings, The Hartford would own all of the shares of Class B Common
Stock (after reclassification of Hartford Life's common stock into Class B
Common Stock prior to March 31, 1997). Hartford Life intends to use the
estimated net proceeds of the Equity Offerings to make a capital contribution to
its insurance subsidiaries, to reduce its third-party indebtedness and for other
general corporate purposes.
The Hartford has advised the Company that its current intent is to continue
to beneficially own at least 80% of Hartford Life, but it is under no
contractual obligation to do so, except for a limited period. Provided that The
Hartford continues to beneficially own at least 80% of the combined voting power
or the value of the outstanding capital stock of Hartford Life, Hartford Life
will be included for federal income tax purposes in the controlled group of
which The Hartford is the common parent. Each member of a controlled group is
jointly and severally liable for pension funding and pension termination
liabilities of each other member of the controlled group, as well as certain
benefit plan taxes. Accordingly, the Company could be liable for pension
funding, pension termination liabilities and certain other pension related
excise taxes as well as other taxes of another member of The Hartford controlled
group in the event any such liability is incurred, and not discharged, by such
other member.
In connection with the proposed Equity Offerings, Hartford Life plans to
enter into formal agreements, including a master intercompany agreement,
investment management agreements and a new tax sharing agreement, with The
Hartford covering such matters as corporate services, approval of certain
corporate activities, registration rights, owned and leased space, allocation of
expenses, taxes and liabilities, investment advisory services, use of trademarks
and certain other corporate matters. As part of the master intercompany
agreement, Hartford Life would agree to remit to The Hartford 30% of any shared
liabilities for which The Hartford is responsible in respect of the ITT
Spin-off, 30% of any taxes which may be assessed to The
<PAGE>
62 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Hartford relating to the ITT Spin-off and will indemnify The Hartford for
certain other tax liabilities. As of December 31, 1996 there was no known
liability associated with the ITT Spin-off. Such agreements are meant to
maintain the relationship between Hartford Life and The Hartford in a manner
consistent in all material respects with past practice. As a result, management
believes these agreements should not have a material impact on the results of
operations of the Company.
In addition, under insurance company holding laws, agreements between
Hartford Life's insurance subsidiaries and The Hartford must be fair and
reasonable and may be subject to the approval of applicable insurance
commissioners. The agreements will be intended to maintain the relationship
between Hartford Life and The Hartford in a manner generally consistent with
past practices. However, none of these arrangements will result from
arm's-length negotiations and, therefore, the prices charged to Hartford Life
and its subsidiaries for services provided under these arrangements may be
higher or lower than prices that may be charged by third parties.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 63
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE I -- SUMMARY OF INVESTMENTS (OTHER THAN INVESTMENTS IN AFFILIATES)
AS OF DECEMBER 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
ESTIMATED
FAIR
TYPE OF INVESTMENT COST VALUE
- ------------------------------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Fixed Maturities
Bonds and Notes
U.S. Government and government agencies and authorities
(guaranteed sponsored)........................................................................ $ 166 $ 175
U.S. Government and government agencies and authorities
(guaranteed sponsored)--asset-backed.......................................................... 1,970 2,003
States, municipalities and political subdivisions................................................ 373 368
International governments........................................................................ 281 289
Public utilities................................................................................. 877 881
All other corporate including international...................................................... 4,656 4,669
All other corporate--asset-backed................................................................ 3,601 3,591
Short-term investments........................................................................... 1,655 1,648
--------- -----------
Total Fixed Maturities........................................................................... $ 13,579 $ 13,624
Equity Securities
Common Stocks--industrial, miscellaneous, and all other.......................................... 110 119
Total Fixed Maturities and Equity Securities..................................................... $ 13,689 $ 13,743
Other Investments
Policy Loans..................................................................................... 3,836 3,836
Mortgage Loans................................................................................... 2 2
Investments in partnerships and trusts........................................................... 48 48
Futures, options, and miscellaneous.............................................................. 6 56
Total Other Investments.......................................................................... 3,892 3,942
--------- -----------
Total Investments................................................................................ $ 17,581 $ 17,685
--------- -----------
--------- -----------
<CAPTION>
AMOUNT AT
WHICH SHOWN
ON
TYPE OF INVESTMENT BALANCE SHEET
- ------------------------------------------------------------------------------------------------- -------------
<S> <C>
Fixed Maturities
Bonds and Notes
U.S. Government and government agencies and authorities
(guaranteed sponsored)........................................................................ $ 175
U.S. Government and government agencies and authorities
(guaranteed sponsored)--asset-backed.......................................................... 2,003
States, municipalities and political subdivisions................................................ 368
International governments........................................................................ 289
Public utilities................................................................................. 881
All other corporate including international...................................................... 4,669
All other corporate--asset-backed................................................................ 3,591
Short-term investments........................................................................... 1,648
-------------
Total Fixed Maturities........................................................................... $ 13,624
Equity Securities
Common Stocks--industrial, miscellaneous, and all other.......................................... 119
Total Fixed Maturities and Equity Securities..................................................... $ 13,743
Other Investments
Policy Loans..................................................................................... 3,836
Mortgage Loans................................................................................... 2
Investments in partnerships and trusts........................................................... 48
Futures, options, and miscellaneous.............................................................. 6
Total Other Investments.......................................................................... 3,892
-------------
Total Investments................................................................................ $ 17,635
-------------
-------------
</TABLE>
Note: The fair values for short-term investments approximate cost.
<PAGE>
64 HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
FUTURE POLICY
BENEFITS, UNPAID OTHER POLICY
CLAIMS AND CLAIMS AND
DEFERRED POLICY CLAIM ADJUSTMENT BENEFITS
SEGMENT ACQUISITION COSTS EXPENSES PAYABLE
- ---------------------------------------------------------------- ----------------- ------------------- ---------------
<S> <C> <C> <C>
1996
Investment Products............................................. $ 2,030 $ 1,554 $ 6,599
Individual Life Insurance....................................... 730 346 2,160
Employee Benefits............................................... -- 381 9,834
Corporate Operations............................................ -- -- --
Runoff Operations............................................... -- -- 3,541
------ ------ -------
Consolidated Operations......................................... $ 2,760 $ 2,281 $ 22,134
------ ------ -------
------ ------ -------
1995
Investment Products............................................. $ 1,561 $ 1,314 $ 6,204
Individual Life Insurance....................................... 615 706 1,932
Employee Benefits............................................... 12 325 9,285
Corporate Operations............................................ -- -- --
Runoff Operations............................................... -- 28 5,177
------ ------ -------
Consolidated Operations......................................... $ 2,188 $ 2,373 $ 22,598
------ ------ -------
------ ------ -------
1994
Investment Products............................................. $ 1,244 $ 895 $ 4,617
Individual Life Insurance....................................... 565 582 2,543
Employee Benefits............................................... -- 369 6,911
Corporate Operations............................................ -- -- --
Runoff Operations............................................... -- 44 7,257
------ ------ -------
Consolidated Operations......................................... $ 1,809 $ 1,890 $ 21,328
------ ------ -------
------ ------ -------
<CAPTION>
BENEFITS CLAIMS, AMORTIZATION OF
NET REALIZED AND CLAIM DEFERRED POLICY
CAPITAL (LOSSES) ADJUSTMENT ACQUISITION
SEGMENT GAINS EXPENSES COSTS
- ---------------------------------------------------------------- ----------------- ------------------- ---------------
<S> <C> <C> <C>
1996
Investment Products............................................. $ -- $ 451 $ 175
Individual Life Insurance....................................... -- 245 59
Employee Benefits............................................... -- 546 --
Corporate Operations............................................ 6 -- --
Runoff Operations............................................... (219) 293 --
------ ------ -------
Consolidated Operations......................................... $ (213) $ 1,535 $ 234
------ ------ -------
------ ------ -------
1995
Investment Products............................................. $ -- $ 349 $ 117
Individual Life Insurance....................................... -- 127 70
Employee Benefits............................................... -- 496 --
Corporate Operations............................................ (11) 33 --
Runoff Operations............................................... -- 417 12
------ ------ -------
Consolidated Operations......................................... $ (11) $ 1,422 $ 199
------ ------ -------
------ ------ -------
1994
Investment Products............................................. $ -- $ 383 $ 90
Individual Life Insurance....................................... -- 179 51
Employee Benefits............................................... -- 376 --
Corporate Operations............................................ 7 -- --
Runoff Operations............................................... -- 467 4
------ ------ -------
Consolidated Operations......................................... $ 7 $ 1,405 $ 145
------ ------ -------
------ ------ -------
<CAPTION>
PREMIUMS AND NET
OTHER INVESTMENT
SEGMENT CONSIDERATIONS INCOME
- ---------------------------------------------------------------- --------------- -----------
<S> <C> <C>
1996
Investment Products............................................. $ 536 $ 477
Individual Life Insurance....................................... 287 153
Employee Benefits............................................... 881 485
Corporate Operations............................................ -- 75
Runoff Operations............................................... 1 207
------ -----------
Consolidated Operations......................................... $ 1,705 $ 1,397
------ -----------
------ -----------
1995
Investment Products............................................. $ 319 $ 436
Individual Life Insurance....................................... 246 137
Employee Benefits............................................... 922 351
Corporate Operations............................................ -- 67
Runoff Operations............................................... -- 337
------ -----------
Consolidated Operations......................................... $ 1,487 $ 1,328
------ -----------
------ -----------
1994
Investment Products............................................. $ 263 $ 330
Individual Life Insurance....................................... 268 108
Employee Benefits............................................... 569 350
Corporate Operations............................................ -- 23
Runoff Operations............................................... -- 481
------ -----------
Consolidated Operations......................................... $ 1,100 $ 1,292
------ -----------
------ -----------
DIVIDENDS TO OTHER
SEGMENT POLICYHOLDERS EXPENSES
- ---------------------------------------------------------------- --------------- -----------
<S> <C> <C>
1996
Investment Products............................................. $ -- $ 156
Individual Life Insurance....................................... -- 68
Employee Benefits............................................... 635 143
Corporate Operations............................................ -- 16
Runoff Operations............................................... -- 44
------ -----------
Consolidated Operations......................................... $ 635 $ 427
------ -----------
------ -----------
1995
Investment Products............................................. $ -- $ 115
Individual Life Insurance....................................... -- 55
Employee Benefits............................................... 675 138
Corporate Operations............................................ -- 11
Runoff Operations............................................... -- (2)
------ -----------
Consolidated Operations......................................... $ 675 $ 317
------ -----------
------ -----------
1994
Investment Products............................................. $ -- $ (31)
Individual Life Insurance....................................... -- 107
Employee Benefits............................................... 419 100
Corporate Operations............................................ -- 43
Runoff Operations............................................... -- 8
------ -----------
Consolidated Operations......................................... $ 419 $ 227
------ -----------
------ -----------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES 65
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE IV -- REINSURANCE
(IN MILLIONS)
<TABLE>
<CAPTION>
GROSS CEDED TO ASSUMED FROM NET
AMOUNT OTHER COMPANIES OTHER COMPANIES AMOUNT
---------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996
Life Insurance in Force............................... $ 177,094 $ 106,146 $ 31,957 $ 102,905
---------- -------- ------- ----------
Insurance Revenues
Life Insurance and Annuities........................ $ 1,801 $ 298 $ 169 $ 1,672
Accident and Health Insurance....................... 33 4 4 33
---------- -------- ------- ----------
Total................................................. $ 1,834 $ 302 $ 173 $ 1,705
---------- -------- ------- ----------
---------- -------- ------- ----------
For the Year Ended December 31, 1995
Life Insurance in Force............................... $ 182,716 $ 112,774 $ 26,996 $ 96,938
---------- -------- ------- ----------
Insurance Revenues
Life Insurance and Annuities........................ $ 1,232 $ 325 $ 574 $ 1,481
Accident and Health Insurance....................... 313 324 17 6
---------- -------- ------- ----------
Total................................................. $ 1,545 $ 649 $ 591 $ 1,487
---------- -------- ------- ----------
---------- -------- ------- ----------
For the Year Ended December 31, 1994
Life Insurance in Force............................... $ 136,929 $ 87,553 $ 35,016 $ 84,392
---------- -------- ------- ----------
Insurance Revenues
Life Insurance and Annuities........................ $ 1,008 $ 211 $ 294 $ 1,091
Accident and Health Insurance....................... 308 304 5 9
---------- -------- ------- ----------
Total................................................. $ 1,316 $ 515 $ 299 $ 1,100
---------- -------- ------- ----------
---------- -------- ------- ----------
<CAPTION>
PERCENTAGE OF
AMOUNT ASSUMED
TO NET
-----------------
<S> <C>
Year Ended December 31, 1996
Life Insurance in Force............................... 31.1%
Insurance Revenues
Life Insurance and Annuities........................ 10.1%
Accident and Health Insurance....................... 12.1%
Total................................................. 10.1%
For the Year Ended December 31, 1995
Life Insurance in Force............................... 27.8%
Insurance Revenues
Life Insurance and Annuities........................ 38.8%
Accident and Health Insurance....................... 283.3%
Total................................................. 39.7%
For the Year Ended December 31, 1994
Life Insurance in Force............................... 41.5%
Insurance Revenues
Life Insurance and Annuities........................ 26.9%
Accident and Health Insurance....................... 55.6%
Total................................................. 27.2%
</TABLE>
<PAGE>
This page intentionally left blank.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 67
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company
Separate Account Variable Life Two and to the
Owners of Units of Interest Therein:
We have audited the accompanying statement of assets and liabilities of the Bond
Fund Sub-Account, Stock Fund Sub-Account, Money Market Fund Sub-Account,
Advisers Fund Sub-Account, Capital Appreciation Fund Sub-Account, Mortgage
Securities Fund Sub-Account, Index Fund Sub-Account, International Opportunities
Fund Sub-Account, Dividend and Growth Fund Sub-Account, Fidelity VIP Equity
Income Portfolio Sub-Account, Fidelity VIP Overseas Portfolio Sub-Account and
Fidelity VIP II Asset Manager Portfolio Sub-Account (constituting Hartford Life
Insurance Company Separate Account Variable Life Two) (the Accounts) as of
December 31, 1996, and the related statement of operations for the year then
ended and statements of changes in net assets for the year ended December 31,
1996 and the period from inception, August 14, 1995, to December 31, 1995. These
financial statements are the responsibility of the Accounts' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Bond Fund Sub-Account,
Stock Fund Sub-Account, Money Market Fund Sub-Account, Advisers Fund
Sub-Account, Capital Appreciation Fund Sub-Account, Mortgage Securities Fund
Sub-Account, Index Fund Sub-Account, International Opportunities Fund
Sub-Account, Dividend and Growth Fund Sub-Account, Fidelity VIP Equity Income
Portfolio Sub-Account, Fidelity VIP Overseas Portfolio Sub-Account and Fidelity
VIP II Asset Manager Portfolio Sub-Account (constituting Hartford Life Insurance
Company Separate Account Variable Life Two) as of December 31, 1996, the results
of its operations for the year then ended and the changes in its net assets for
the year ended December 31, 1996 and the period from inception, August 14, 1995,
to December 31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 14, 1997
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 68
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Separate Account Variable Life Two
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 210,016
Cost $ 207,615
Market Value......... $ 209,845 -- -- --
Hartford Stock Fund,
Inc.
Shares 418,860
Cost $1,591,017
Market Value......... -- $1,735,215 -- --
HVA Money Market Fund,
Inc.
Shares 4,011,957
Cost $4,011,957
Market Value......... -- -- $4,011,957 --
Hartford Advisers Fund,
Inc.
Shares 650,907
Cost $1,318,380
Market Value......... -- -- -- $1,412,163
Hartford Capital
Appreciation Fund,
Inc.
Shares 592,785
Cost $2,144,337
Market Value......... -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 41,659
Cost $ 43,453
Market Value......... -- -- -- --
Hartford Index Fund,
Inc.
Shares 503,923
Cost $1,088,477
Market Value......... -- -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 915,353
Cost $1,230,395
Market Value......... -- -- -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 354,764
Cost $ 510,504
Market Value......... -- -- -- --
Fidelity VIP Equity
Income Fund
Shares 74,513
Cost $1,446,293
Market Value......... -- -- -- --
Fidelity VIP Overseas
Fund
Shares 8,870
Cost $ 158,416
Market Value......... -- -- -- --
Fidelity VIP II Asset
Manager Fund
Shares 18,740
Cost $ 296,387
Market Value......... -- -- -- --
Due from Hartford Life
Insurance Company..... 5 602 349,108 49
Receivable from fund
shares sold........... -- -- -- --
----------- ----------- ----------- -------------
Total Assets........... 209,850 1,735,817 4,361,065 1,412,212
----------- ----------- ----------- -------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- -- --
Payable for fund shares
purchased............. -- 500 349,072 --
----------- ----------- ----------- -------------
Total Liabilities...... -- 500 349,072 --
----------- ----------- ----------- -------------
Net Assets (variable
annuity contract
liabilities).......... $ 209,850 $1,735,317 $4,011,993 $1,412,212
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 170,124 969,692 3,411,705 903,022
Unit Price............. $ 1.233518 $ 1.789555 $ 1.175949 $ 1.563874
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 69
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY VIP
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND EQUITY
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND INCOME FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares 210,016
Cost $ 207,615
Market Value......... -- -- -- -- -- --
Hartford Stock Fund,
Inc.
Shares 418,860
Cost $1,591,017
Market Value......... -- -- -- -- -- --
HVA Money Market Fund,
Inc.
Shares 4,011,957
Cost $4,011,957
Market Value......... -- -- -- -- -- --
Hartford Advisers Fund,
Inc.
Shares 650,907
Cost $1,318,380
Market Value......... -- -- -- -- -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares 592,785
Cost $2,144,337
Market Value......... $2,320,358 -- -- -- -- --
Hartford Mortgage
Securities Fund, Inc.
Shares 41,659
Cost $ 43,453
Market Value......... -- $ 43,983 -- -- -- --
Hartford Index Fund,
Inc.
Shares 503,923
Cost $1,088,477
Market Value......... -- -- $1,200,230 -- -- --
Hartford International
Opportunities Fund,
Inc.
Shares 915,353
Cost $1,230,395
Market Value......... -- -- -- $1,287,791 -- --
Hartford Dividend and
Growth Fund, Inc.
Shares 354,764
Cost $ 510,504
Market Value......... -- -- -- -- $ 548,968 --
Fidelity VIP Equity
Income Fund
Shares 74,513
Cost $1,446,293
Market Value......... -- -- -- -- -- $1,567,001
Fidelity VIP Overseas
Fund
Shares 8,870
Cost $ 158,416
Market Value......... -- -- -- -- -- --
Fidelity VIP II Asset
Manager Fund
Shares 18,740
Cost $ 296,387
Market Value......... -- -- -- -- -- --
Due from Hartford Life
Insurance Company..... 298 -- 16 1 540 1,039
Receivable from fund
shares sold........... -- -- -- -- -- --
----------------- --------------- ----------- ------------------ ------------ ------------
Total Assets........... 2,320,656 43,983 1,200,246 1,287,792 549,508 1,568,040
----------------- --------------- ----------- ------------------ ------------ ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- 1 -- -- -- --
Payable for fund shares
purchased............. -- -- -- -- 500 2,295
----------------- --------------- ----------- ------------------ ------------ ------------
Total Liabilities...... -- 1 -- -- 500 2,295
----------------- --------------- ----------- ------------------ ------------ ------------
Net Assets (variable
annuity contract
liabilities).......... $2,320,656 $ 43,982 $1,200,246 $1,287,792 $ 549,008 $1,565,745
----------------- --------------- ----------- ------------------ ------------ ------------
----------------- --------------- ----------- ------------------ ------------ ------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 1,329,195 35,531 684,924 860,563 362,266 1,142,697
Unit Price............. $ 1.745910 $ 1.237827 $ 1.752378 $ 1.496455 $ 1.515489 $ 1.370219
<CAPTION>
FIDELITY VIP
FIDELITY VIP II
OVERSEAS ASSET
FUND MANAGER FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ ------------
<S> <C> <C>
ASSETS:
Investments:
Hartford Bond Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Stock Fund,
Inc.
Shares
Cost
Market Value......... -- --
HVA Money Market Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Advisers Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Capital
Appreciation Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Mortgage
Securities Fund, Inc.
Shares
Cost
Market Value......... -- --
Hartford Index Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford International
Opportunities Fund,
Inc.
Shares
Cost
Market Value......... -- --
Hartford Dividend and
Growth Fund, Inc.
Shares
Cost
Market Value......... -- --
Fidelity VIP Equity
Income Fund
Shares
Cost
Market Value......... -- --
Fidelity VIP Overseas
Fund
Shares
Cost
Market Value......... $ 167,116 --
Fidelity VIP II Asset
Manager Fund
Shares
Cost
Market Value......... -- $ 317,271
Due from Hartford Life
Insurance Company..... 4,898 --
Receivable from fund
shares sold........... -- 17
------------ ------------
Total Assets........... 172,014 317,288
------------ ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- 4,447
Payable for fund shares
purchased............. 4,954 --
------------ ------------
Total Liabilities...... 4,954 4,447
------------ ------------
Net Assets (variable
annuity contract
liabilities).......... $ 167,060 $ 312,841
------------ ------------
------------ ------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 137,419 247,940
Unit Price............. $ 1.215706 $ 1.261761
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 70
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT VARIABLE LIFE TWO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $4,617 $ 9,981 $ 56,534 $ 16,365
----------- ----------- ----------- -------------
Net investment income
(loss).............. 4,617 9,981 56,534 16,365
----------- ----------- ----------- -------------
Capital gains income... -- -- -- --
----------- ----------- ----------- -------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 9 (88) -- 975
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,231 144,184 -- 93,783
----------- ----------- ----------- -------------
Net realized and
unrealized gain
(loss) on
investments......... 2,240 144,096 -- 94,758
----------- ----------- ----------- -------------
Net increase
(decrease) in net
assets resulting
from operations..... $6,857 $154,077 $ 56,534 $111,123
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 71
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY
VIP
EQUITY
CAPITAL MORTGAGE INTERNATIONAL DIVIDEND AND INCOME
APPRECIATION FUND SECURITIES FUND INDEX FUND OPPORTUNITIES FUND GROWTH FUND PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------- --------------- ----------- ------------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ 5,970 $ 1,084 $ 9,179 $ 9,122 $4,704 $ --
-------- ------ ----------- ------- ------------ ----------
Net investment income
(loss).............. 5,970 1,084 9,179 9,122 4,704 --
-------- ------ ----------- ------- ------------ ----------
Capital gains income... -- -- -- -- -- --
-------- ------ ----------- ------- ------------ ----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 512 -- 2,901 296 938 77
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 176,020 530 111,747 57,397 38,465 120,671
-------- ------ ----------- ------- ------------ ----------
Net realized and
unrealized gain
(loss) on
investments......... 176,532 530 114,648 57,693 39,403 120,748
-------- ------ ----------- ------- ------------ ----------
Net increase
(decrease) in net
assets resulting
from operations..... $182,502 $ 1,614 $123,827 $ 66,815 $44,107 $120,748
-------- ------ ----------- ------- ------------ ----------
-------- ------ ----------- ------- ------------ ----------
<CAPTION>
FIDELITY
VIP FIDELITY VIP II
OVERSEAS ASSET MANAGER
PORTFOLIO PORTFOLIO
SUB-ACCOUNT SUB-ACCOUNT
-------- ------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............. $-- $--
-------- -------
Net investment income
(loss).............. -- --
-------- -------
Capital gains income... -- --
-------- -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 7 (450)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 8,702 20,884
-------- -------
Net realized and
unrealized gain
(loss) on
investments......... 8,709 20,434
-------- -------
Net increase
(decrease) in net
assets resulting
from operations..... $8,709 $20,434
-------- -------
-------- -------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 72
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Separate Account Variable Life Two
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY
BOND FUND STOCK FUND MARKET FUND ADVISERS FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 4,617 $ 9,981 $ 56,534 $ 16,365
Net realized gain
(loss) on security
transactions.......... 9 (88) -- 975
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 2,231 144,184 -- 93,783
----------- ----------- ----------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 6,857 154,077 56,534 111,123
----------- ----------- ----------------- -------------
UNIT TRANSACTIONS:
Purchases.............. 24,540 128,400 21,595,898 163,384
Net transfers.......... 184,962 1,479,101 (17,911,483) 1,195,723
Surrenders............. (2,166) (4,782) (350,401) (21,798)
Loan withdrawals....... -- (22,053) (23,407) (21,530)
Cost of insurance...... (4,343) (21,092) (286,663) (14,690)
----------- ----------- ----------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 202,993 1,559,574 3,023,944 1,301,089
----------- ----------- ----------------- -------------
Total increase
(decrease) in net
assets................ 209,850 1,713,651 3,080,478 1,412,212
NET ASSETS:
Beginning of period.... -- 21,666 931,515 --
----------- ----------- ----------------- -------------
End of period.......... $209,850 $1,735,317 $4,011,993 $1,412,212
----------- ----------- ----------------- -------------
----------- ----------- ----------------- -------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, AUGUST 14, 1995, TO DECEMBER 31, 1995
MONEY CAPTIAL
STOCK FUND MARKET FUND APPRECIATION FUND INDEX FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------------- -------------
OPERATIONS:
Net investment income
(loss)................ $ 7 $ 7,711 $ -- $ 7
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 14 -- -- 6
----------- ----------- ----------------- -------------
Net increase (decrease)
in net assets
resulting from
operations............ 21 7,711 -- 13
----------- ----------- ----------------- -------------
UNIT TRANSACTIONS:
Purchases.............. -- 1,795,344 -- --
Net transfers.......... 21,645 (824,475) 122,583 47,913
Surrenders............. -- (47,065) -- --
Cost of insurance and
other fees............ -- -- -- --
----------- ----------- ----------------- -------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 21,645 923,804 122,583 47,913
----------- ----------- ----------------- -------------
Total increase
(decrease) in net
assets................ 21,666 931,515 122,583 47,926
NET ASSETS:
Beginning of period.... -- -- -- --
----------- ----------- ----------------- -------------
End of period.......... $ 21,666 $ 931,515 $ 122,583 $ 47,926
----------- ----------- ----------------- -------------
----------- ----------- ----------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 73
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPTIAL MORTGAGE INTERNATIONAL DIVIDEND FIDELITY VIP
APPRECIATION SECURITIES OPPORTUNITIES AND EQUITY
FUND FUND INDEX FUND FUND GROWTH FUND INCOME FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------- -------------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 5,970 $ 1,084 $ 9,179 $ 9,122 $ 4,704 $ --
Net realized gain
(loss) on security
transactions.......... 512 -- 2,901 296 938 77
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 176,020 530 111,747 57,397 38,465 120,671
---------------- ------- ---------- ------------- ----------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 182,502 1,614 123,827 66,815 44,107 120,748
---------------- ------- ---------- ------------- ----------- ------------
UNIT TRANSACTIONS:
Purchases.............. 341,337 6,471 50,114 95,211 13,008 116,685
Net transfers.......... 1,756,480 37,915 1,092,579 1,031,056 560,046 1,369,018
Surrenders............. (21,886) (1,050) (92,837 ) (3,592) (47,416) (27,120)
Loan withdrawals....... (21,502) -- -- (8,130) (12,999) (4)
Cost of insurance...... (38,858) (968) (21,363 ) (33,663) (7,738) (17,752)
---------------- ------- ---------- ------------- ----------- ------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 2,015,571 42,368 1,028,493 1,080,882 504,901 1,440,827
---------------- ------- ---------- ------------- ----------- ------------
Total increase
(decrease) in net
assets................ 2,198,073 43,982 1,152,320 1,147,697 549,008 1,561,575
NET ASSETS:
Beginning of period.... 122,583 -- 47,926 140,095 -- 4,170
---------------- ------- ---------- ------------- ----------- ------------
End of period.......... $2,320,656 $ 43,982 $1,200,246 $1,287,792 $ 549,008 $1,565,745
---------------- ------- ---------- ------------- ----------- ------------
---------------- ------- ---------- ------------- ----------- ------------
INTERNATIONAL FIDELITY VIP
OPPORTUNITIES EQUITY INCOME
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
---------------- --------------
OPERATIONS:
Net investment income
(loss)................ $ -- $ --
Net unrealized
appreciation
(depreciation) of
investments during the
period................ -- 37
---------------- -------
Net increase (decrease)
in net assets
resulting from
operations............ -- 37
---------------- -------
UNIT TRANSACTIONS:
Purchases.............. -- --
Net transfers.......... 140,095 4,133
Surrenders............. -- --
Cost of insurance and
other fees............ -- --
---------------- -------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 140,095 4,133
---------------- -------
Total increase
(decrease) in net
assets................ 140,095 4,170
NET ASSETS:
Beginning of period.... -- --
---------------- -------
End of period.......... $ 140,095 $ 4,170
---------------- -------
---------------- -------
<CAPTION>
FIDELITY VIP
FIDELITY VIP II
OVERSEAS ASSET MANAGER
FUND FUND
SUB-ACCOUNT SUB-ACCOUNT
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ -- $ --
Net realized gain
(loss) on security
transactions.......... 7 (450)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 8,702 20,884
------------ --------------
Net increase (decrease)
in net assets
resulting from
operations............ 8,709 20,434
------------ --------------
UNIT TRANSACTIONS:
Purchases.............. 12,350 1,532
Net transfers.......... 146,928 299,311
Surrenders............. 361 (5,819)
Loan withdrawals....... -- --
Cost of insurance...... (1,288) (2,617)
------------ --------------
Net increase (decrease)
in net assets
resulting from unit
transactions.......... 158,351 292,407
------------ --------------
Total increase
(decrease) in net
assets................ 167,060 312,841
NET ASSETS:
Beginning of period.... -- --
------------ --------------
End of period.......... $ 167,060 $312,841
------------ --------------
------------ --------------
OPERATIONS:
Net investment income
(loss)................
Net unrealized
appreciation
(depreciation) of
investments during the
period................
Net increase (decrease)
in net assets
resulting from
operations............
UNIT TRANSACTIONS:
Purchases..............
Net transfers..........
Surrenders.............
Cost of insurance and
other fees............
Net increase (decrease)
in net assets
resulting from unit
transactions..........
Total increase
(decrease) in net
assets................
NET ASSETS:
Beginning of period....
End of period..........
</TABLE>
<PAGE>
74 HARTFORD LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT VARIABLE LIFE TWO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- ---------------------------------------------------
1. ORGANIZATION:
Separate Account Variable Life Two (the Account) is a separate investment
account within Hartford Life Insurance Company (the Company) and is registered
with the Securities and Exchange Commission (SEC) as a unit investment trust
under the Investment Company Act of 1940, as amended. The Account consists of
twenty-two sub-accounts. These financial statements include twelve sub-accounts
which invest solely in Hartford Mutual Funds and Fidelity Mutual Funds (the
Funds). The other ten sub-accounts, which invest in Putnam Variable Trust Funds,
are presented in separate financial statements. Both the Company and the Account
are subject to supervision and regulation by the Department of Insurance of the
State of Connecticut and the SEC. The Account invests deposits by variable life
contractholders of the Company in the Funds as directed by the contractholders.
- ---------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
a) SECURITY TRANSACTIONS--Security transactions are
recorded on the trade date (date the order to buy or sell is executed).
Cost of investments sold is determined on the basis of identified cost.
Dividends and capital gains income are accrued as of the ex-dividend
date. Capital gains income represents dividends from the Funds which are
characterized as capital gains under tax regulations.
b) SECURITY VALUATION--The investment in shares of the
Hartford, and Fidelity mutual funds are valued at the closing net asset
value per share as determined by the appropriate Fund as of December 31,
1996.
c) FEDERAL INCOME TAXES--The operations of the
Account form a part of, and are taxed with, the total operations of the
Company, which is taxed as an insurance company under the Internal
Revenue Code. Under current law, no federal income taxes are payable
with respect to the operations of the Account.
d) USE OF ESTIMATES--The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the
financial statements and the reported amounts of income and expenses
during the period. Operating results in the future could vary from the
amounts derived from management's estimates.
- ---------------------------------------------------
3.ADMINISTRATION OF THE ACCOUNT AND
RELATED CHARGES:
In accordance with the terms of the contracts, the Company makes deductions
for mortality and expense undertakings, cost of insurance, administrative fees,
and state premium taxes. These charges are deducted through termination of units
of interest from applicable contractholders' accounts in accordance with the
terms of the contracts.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 75
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company
Putnam Capital Manager Trust Separate
Account Variable Life Two and to
The Owners of Units of Interest Therein:
We have audited the accompanying statement of assets and liabilities of
Diversified Income Fund Sub-Account, Global Asset Allocation Fund Sub-Account,
Global Growth Fund Sub-Account, Growth and Income Fund Sub-Account, High Yield
Fund Sub-Account, Money Market Fund Sub-Account, New Opportunities Fund
Sub-Account, U.S. Government and High Quality Bond Fund Sub-Account, Utilities
Growth and Income Fund Sub-Account and Voyager Fund Sub-Account (constituting
Hartford Life Insurance Company Putnam Capital Manager Trust Separate Account
Variable Life Two) (the Account) as of December 31, 1996, and the related
statement of operations for the year then ended and statements of changes in net
assets for the year ended December 31, 1996 and the period from inception,
August 14, 1995, to December 31, 1995. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Diversified Income Fund
Sub-Account, Global Asset Allocation Fund Sub-Account, Global Growth Fund
Sub-Account, Growth and Income Fund Sub-Account, High Yield Fund Sub-Account,
Money Market Fund Sub-Account, New Opportunities Fund Sub-Account, U.S.
Government and High Quality Bond Fund Sub-Account, Utilities Growth and Income
Fund Sub-Account and Voyager Fund Sub-Account (constituting Hartford Life
Insurance Company Putnam Capital Manager Trust Separate Account Variable Life
Two) as of December 31, 1996, the results of its operations for the year then
ended and changes in its net assets for the year ended December 31, 1996 and the
period from inception, August 14, 1995, to December 31, 1995, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 14, 1997
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 76
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Putnam Capital Manager Trust Separate Account Variable Life Two
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
GLOBAL
ASSET
DIVERSIFIED ALLOCATION GLOBAL
INCOME FUND FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments:
Putnam VT Diversified
Income Fund
Shares 5,316
Cost $ 58,095
Market Value......... $ 59,911 -- --
Putnam VT Global Asset
Allocation Fund
Shares 22,320
Cost $ 361,596
Market Value......... -- $ 385,013 --
Putnam VT Global Growth
Fund
Shares 89,239
Cost $1,412,148
Market Value......... -- -- $1,506,351
Putnam VT Growth and
Income Fund
Shares 65,763
Cost $1,487,814
Market Value......... -- -- --
Putnam VT High Yield
Fund
Shares 26,909
Cost $ 330,249
Market Value......... -- -- --
Putnam VT Money Market
Fund
Shares 200,433
Cost $ 200,433
Market Value......... -- -- --
Putnam VT New
Opportunities Fund
Shares 102,739
Cost $1,781,382
Market Value......... -- -- --
Putnam VT U.S.
Government and High
Quality Bond Fund
Shares 70,509
Cost $ 897,461
Market Value......... -- -- --
Putnam VT Utilities
Growth and Income Fund
Shares 9,582
Cost $ 131,216
Market Value......... -- -- --
Putnam VT Voyager Fund
Shares 95,062
Cost $3,032,374
Market Value......... -- -- --
Due from Hartford Life
Insurance Company..... -- 16 316
------------- ----------- -----------
Total Assets........... 59,911 385,029 1,506,667
------------- ----------- -----------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- --
Payable for fund shares
purchased............. -- -- 200
------------- ----------- -----------
Total Liabilities...... -- -- 200
------------- ----------- -----------
Net Assets (variable
annuity contract
liabilities).......... $ 59,911 $ 385,029 $1,506,467
------------- ----------- -----------
------------- ----------- -----------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 4,966 25,162 94,762
Unit Price............. $12.064581 $15.301933 $15.897325
GRAND TOTAL:
Contract Liability..... $ 59,911 $ 385,029 $1,506,467
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 77
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
AND HIGH UTILITIES
GROWTH AND HIGH YIELD MONEY NEW QUALITY BOND GROWTH AND
INCOME FUND FUND MARKET FUND OPPORTUNITIES FUND FUND INCOME FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------------- ----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Putnam VT Diversified
Income Fund
Shares 5,316
Cost $ 58,095
Market Value......... -- -- -- -- -- --
Putnam VT Global Asset
Allocation Fund
Shares 22,320
Cost $ 361,596
Market Value......... -- -- -- -- -- --
Putnam VT Global Growth
Fund
Shares 89,239
Cost $1,412,148
Market Value......... -- -- -- -- -- --
Putnam VT Growth and
Income Fund
Shares 65,763
Cost $1,487,814
Market Value......... $1,615,133 -- -- -- -- --
Putnam VT High Yield
Fund
Shares 26,909
Cost $ 330,249
Market Value......... -- $ 348,744 -- -- -- --
Putnam VT Money Market
Fund
Shares 200,433
Cost $ 200,433
Market Value......... -- -- $ 200,432 -- -- --
Putnam VT New
Opportunities Fund
Shares 102,739
Cost $1,781,382
Market Value......... -- -- -- $1,769,161 -- --
Putnam VT U.S.
Government and High
Quality Bond Fund
Shares 70,509
Cost $ 897,461
Market Value......... -- -- -- -- $ 931,423 --
Putnam VT Utilities
Growth and Income Fund
Shares 9,582
Cost $ 131,216
Market Value......... -- -- -- -- -- $ 141,815
Putnam VT Voyager Fund
Shares 95,062
Cost $3,032,374
Market Value......... -- -- -- -- -- --
Due from Hartford Life
Insurance Company..... 229 4 1 245 -- 109
------------- ----------------- ----------------- ------------------ ------------ ------------
Total Assets........... 1,615,362 348,748 200,434 1,769,406 931,423 141,924
------------- ----------------- ----------------- ------------------ ------------ ------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... -- -- -- -- 82 --
Payable for fund shares
purchased............. 225 -- -- -- -- 75
------------- ----------------- ----------------- ------------------ ------------ ------------
Total Liabilities...... 225 -- -- -- 82 75
------------- ----------------- ----------------- ------------------ ------------ ------------
Net Assets (variable
annuity contract
liabilities).......... $1,615,137 $ 348,748 $ 200,434 $1,769,406 $ 931,341 $ 141,849
------------- ----------------- ----------------- ------------------ ------------ ------------
------------- ----------------- ----------------- ------------------ ------------ ------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 90,675 24,101 171,267 119,302 74,479 9,576
Unit Price............. $17.812315 $14.470063 $ 1.170296 $14.831271 $12.504679 $14.812870
GRAND TOTAL:
Contract Liability..... $1,615,137 $ 348,748 $ 200,433 $1,769,406 $ 931,341 $ 141,849
<CAPTION>
VOYAGER FUND
SUB-ACCOUNT
------------
<S> <C>
ASSETS:
Investments:
Putnam VT Diversified
Income Fund
Shares
Cost
Market Value......... --
Putnam VT Global Asset
Allocation Fund
Shares
Cost
Market Value......... --
Putnam VT Global Growth
Fund
Shares
Cost
Market Value......... --
Putnam VT Growth and
Income Fund
Shares
Cost
Market Value......... --
Putnam VT High Yield
Fund
Shares
Cost
Market Value......... --
Putnam VT Money Market
Fund
Shares
Cost
Market Value......... --
Putnam VT New
Opportunities Fund
Shares
Cost
Market Value......... --
Putnam VT U.S.
Government and High
Quality Bond Fund
Shares
Cost
Market Value......... --
Putnam VT Utilities
Growth and Income Fund
Shares
Cost
Market Value......... --
Putnam VT Voyager Fund
Shares
Cost
Market Value......... $3,092,374
Due from Hartford Life
Insurance Company..... 705
------------
Total Assets........... 3,093,079
------------
LIABILITIES:
Due to Hartford Life
Insurance Company..... --
Payable for fund shares
purchased............. 500
------------
Total Liabilities...... 500
------------
Net Assets (variable
annuity contract
liabilities).......... $3,092,579
------------
------------
DEFERRED ANNUITY
CONTRACTS IN THE
ACCUMULATION PERIOD:
GROUP SUB-ACCOUNTS:
Units Owned by
Participants.......... 168,741
Unit Price............. $18.327403
GRAND TOTAL:
Contract Liability..... $3,092,579
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 78
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Putnam Capital Manager Trust Separate Account Variable Life Two
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GLOBAL
ASSET
DIVERSIFIED ALLOCATION GLOBAL
INCOME FUND FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ -- $ -- $ --
------ ----------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 23 23 22
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 1,816 23,416 94,204
------ ----------- -----------
Net gain (loss) on
investments........... 1,839 23,439 94,226
------ ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ $ 1,839 $ 23,439 $ 94,226
------ ----------- -----------
------ ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 79
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
AND HIGH UTILITIES
GROWTH AND HIGH YIELD MONEY NEW QUALITY BOND GROWTH AND
INCOME FUND FUND MARKET FUND OPPORTUNITIES FUND FUND INCOME FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------------- ----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............. $ -- $ -- $ 2,362 $ -- $ -- $ --
------------- ------- ------ -------- ------------ ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 1,065 284 -- 387 184 (545)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 127,318 18,495 -- (12,221) 33,963 10,598
------------- ------- ------ -------- ------------ ------------
Net gain (loss) on
investments........... 128,383 18,779 -- (11,834) 34,147 10,053
------------- ------- ------ -------- ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ $ 128,383 $ 18,779 $ 2,362 $ (11,834) $ 34,147 $ 10,053
------------- ------- ------ -------- ------------ ------------
------------- ------- ------ -------- ------------ ------------
<CAPTION>
VOYAGER FUND
SUB-ACCOUNT
------------
<S> <C>
INVESTMENT INCOME:
Dividends.............. $ --
------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) on security
transactions.......... 9
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 59,940
------------
Net gain (loss) on
investments........... 59,949
------------
Net increase (decrease)
in net assets
resulting from
operations............ $ 59,949
------------
------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 80
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Putnam Capital Manager Trust Separate Account Variable Life Two
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GLOBAL ASSET
DIVERSIFIED ALLOCATION GLOBAL
INCOME FUND FUND GROWTH FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- -----------
<S> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ -- $ -- $ --
Net realized gain on
security
transactions.......... 23 23 22
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 1,816 23,416 94,204
----------- ------------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 1,839 23,439 94,226
----------- ------------- -----------
UNIT TRANSACTIONS:
Purchases.............. 5,545 46,464 157,447
Net transfers.......... 53,826 314,944 1,150,116
Surrenders............. (900) (3,964) (4,642)
Loan withdrawals....... -- -- --
Cost of insurance...... (399) (13,366) (39,530)
----------- ------------- -----------
Net increase in net
assets resulting from
unit transactions..... 58,072 344,078 1,263,391
----------- ------------- -----------
Total increase in net
assets................ 59,911 367,517 1,357,617
NET ASSETS:
Beginning of period.... -- 17,512 148,850
----------- ------------- -----------
End of period.......... $ 59,911 $ 385,029 $1,506,467
----------- ------------- -----------
----------- ------------- -----------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION, AUGUST 14, 1995 TO DECEMBER 31, 1995
GLOBAL
ASSET
ALLOCATION GLOBAL MONEY
FUND GROWTH FUND MARKET FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------- -----------
OPERATIONS:
Net investment
income................ $ -- $ -- $ --
Net realized gain on
security
transactions.......... -- -- --
Net unrealized
appreciation of
investments during the
period................ -- -- --
----------- ------------- -----------
Net increase in net
assets resulting from
operations............ -- -- --
----------- ------------- -----------
UNIT TRANSACTIONS:
Purchases.............. -- -- --
Net transfers.......... 17,512 148,850 2,398
Surrenders............. -- -- --
Cost of insurance...... -- -- --
----------- ------------- -----------
Net increase in net
assets resulting from
unit transactions..... 17,512 148,850 2,398
----------- ------------- -----------
Total increase in net
assets................ 17,512 148,850 2,398
NET ASSETS:
Beginning of period.... -- -- --
----------- ------------- -----------
End of period.......... $ 17,512 $ 148,850 $ 2,398
----------- ------------- -----------
----------- ------------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 81
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
AND HIGH UTILITIES
GROWTH AND HIGH YIELD MONEY NEW QUALITY BOND GROWTH AND
INCOME FUND FUND MARKET FUND OPPORTUNITIES FUND FUND INCOME FUND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ----------------- ----------------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ -- $ -- $ 2,362 $ -- $ -- $ --
Net realized gain on
security
transactions.......... 1,065 284 -- 387 184 (545)
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 127,318 18,495 -- (12,221) 33,963 10,598
------------- -------- -------- ------------------ ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 128,383 18,779 2,362 (11,834) 34,147 10,053
------------- -------- -------- ------------------ ------------ ------------
UNIT TRANSACTIONS:
Purchases.............. 71,075 46,744 9,632 181,831 97,098 30,724
Net transfers.......... 1,496,949 365,622 189,742 1,648,281 580,013 101,621
Surrenders............. (63,304) (73,491) (2,732) (23,865) (22,449) 686
Loan withdrawals....... -- -- -- (4) -- --
Cost of insurance...... (17,966) (8,906) (968) (24,993) (37,657) (1,235)
------------- -------- -------- ------------------ ------------ ------------
Net increase in net
assets resulting from
unit transactions..... 1,486,754 329,969 195,674 1,781,240 617,005 131,796
------------- -------- -------- ------------------ ------------ ------------
Total increase in net
assets................ 1,615,137 348,748 198,036 1,769,406 651,152 141,849
NET ASSETS:
Beginning of period.... -- -- 2,398 -- 280,189 --
------------- -------- -------- ------------------ ------------ ------------
End of period.......... $1,615,137 $ 348,748 $ 200,434 $1,769,406 $ 931,341 $ 141,849
------------- -------- -------- ------------------ ------------ ------------
------------- -------- -------- ------------------ ------------ ------------
U.S.
GOVERNMENT
AND HIGH
QUALITY
BOND FUND VOYAGER FUND
SUB-ACCOUNT SUB-ACCOUNT
------------- -----------------
OPERATIONS:
Net investment
income................ $ -- $ --
Net realized gain on
security
transactions.......... -- --
Net unrealized
appreciation of
investments during the
period................ -- 60
------------- --------
Net increase in net
assets resulting from
operations............ -- 60
------------- --------
UNIT TRANSACTIONS:
Purchases.............. -- --
Net transfers.......... 280,189 39,157
Surrenders............. -- --
Cost of insurance...... -- --
------------- --------
Net increase in net
assets resulting from
unit transactions..... 280,189 39,157
------------- --------
Total increase in net
assets................ 280,189 39,157
NET ASSETS:
Beginning of period.... -- --
------------- --------
End of period.......... $ 280,189 $ 39,157
------------- --------
------------- --------
<CAPTION>
VOYAGER FUND
SUB-ACCOUNT
------------
<S> <C>
OPERATIONS:
Net investment income
(loss)................ $ --
Net realized gain on
security
transactions.......... 9
Net unrealized
appreciation
(depreciation) of
investments during the
period................ 59,940
------------
Net increase (decrease)
in net assets
resulting from
operations............ 59,949
------------
UNIT TRANSACTIONS:
Purchases.............. 326,269
Net transfers.......... 2,756,875
Surrenders............. (47,111)
Loan withdrawals....... (4)
Cost of insurance...... (42,616)
------------
Net increase in net
assets resulting from
unit transactions..... 2,993,413
------------
Total increase in net
assets................ 3,053,362
NET ASSETS:
Beginning of period.... 39,127
------------
End of period.......... $3,092,579
------------
------------
OPERATIONS:
Net investment
income................
Net realized gain on
security
transactions..........
Net unrealized
appreciation of
investments during the
period................
Net increase in net
assets resulting from
operations............
UNIT TRANSACTIONS:
Purchases..............
Net transfers..........
Surrenders.............
Cost of insurance......
Net increase in net
assets resulting from
unit transactions.....
Total increase in net
assets................
NET ASSETS:
Beginning of period....
End of period..........
</TABLE>
<PAGE>
82 Hartford Life Insurance Company
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PUTNAM CAPITAL MANAGER TRUST SEPARATE ACCOUNT VARIABLE LIFE TWO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- ---------------------------------------------------
1. ORGANIZATION:
Separate Account Variable Life Two (the Account) is a separate investment
account within Hartford Life Insurance Company (the Company) and is registered
with the Securities and Exchange Commission (SEC) as a unit investment trust
under the Investment Company Act of 1940, as amended. The Account consists of
twenty two sub-accounts. These financial statements include ten subaccounts
which invest solely in the Putnam Variable Trust Funds (the Funds). The other
twelve sub-accounts, which invest in Hartford Mutual Funds and Fidelity Mutual
Funds, are presented in separate financial statements. Both the Company and the
Account are subject to supervision and regulation by the Department of Insurance
of the State of Connecticut and the SEC. The Account invests deposits by
variable life contractholders of the Company in the various mutual funds as
directed by the contractholders.
- ---------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the
Account, which are in accordance with generally accepted accounting principles
in the investment company industry:
A) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade
date (date the order to buy or sell is executed). Cost of investments
sold is determined on the basis of identified cost. Dividends and capital
gains income are accrued as of the ex-dividend date. Capital gains income
represents dividends from the Funds which are characterized as capital
gains under tax regulations.
B) SECURITY VALUATION -- The investments in shares of the Funds are valued
at the closing net asset value per share as determined by the appropriate
Fund as of December 31, 1996.
C) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and
are taxed with, the total operations of the Company, which is taxed as an
insurance company under the Internal Revenue Code. Under current law, no
federal income taxes are payable with respect to the operations of the
Account.
D) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the period. Operating results in
the future could vary from the amounts derived from management's
estimates.
- ---------------------------------------------------
3. ADMINISTRATION OF THE ACCOUNT AND
RELATED CHARGES:
In accordance with the terms of the contracts, the Company makes deductions
for mortality and expense undertakings, cost of insurance, administrative fees,
and state premium taxes. These charges are deducted through termination of units
of interest from applicable contract owners' accounts, in accordance with the
terms of the contracts.
<PAGE>
NOT ALL OF THE FOLLOWING FUNDS ARE AVAILABLE IN THE
STAG LAST SURVIVOR PRODUCT.
PLEASE REFER TO PAGE 1 OF THE PROSPECTUS FOR A LIST OF
THE AVAILABLE FUNDS.
